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Amazon's phone isn't for everyone, but is it for anyone?

Aaron Pressman


Last year, when Amazon (AMZN) CEO Jeff Bezos unveiled his third generation of Kindle Fire tablets, he also offered a new sales slogan: premium products at non-premium prices.

But on Wednesday, when Bezos brought forth the new Amazon Fire phone, that slogan was nowhere to be seen. And that could be a big problem for the new phone.

As noted before the announcement, Amazon didn’t need to make a phone to appeal to everyone to aid its own efforts. Kindle tablets, after all, have an overall market share in the single digits. But the owners tend to buy more Amazon stuff, sign up for prime memberships and generally act as more-profitable customers.

The problem is that the phone seems to have no special draw. It certainly won’t appeal to everybody. The question is if it will even appeal to anybody.

The Fire tablets, by contrast, have a straightforward appeal: premium hardware at a discount price. Sure, you can’t run all the apps you can on an iPad, or even an Android tablet. But you can do most of what people want to do with tablets — surf the Web, watch video, play games — for considerably less than the cost of an iPad or one of Samsung’s high-end models.

The Fire Phone, sadly, has no such appeal. It has some gee-whiz features, such as a simulated 3-D view that gives maps and other apps seemingly more depth. And the camera is hot stuff. But people use a lot more apps on their phones, and Amazon’s has fewer of them than Apple’s (AAPL) or Google’s (GOOGL).

Amazon has built a pretty compelling media ecosystem, with its Kindle ebooks, Prime streaming videos and a recently-debuted music service. But those won't help sell many Fire phones. Ebooks and music are available via Amazon apps to Android and iOS users while a video app is offered for iOS.

Wall Street seemed excited by the phone's amazing scan and identify feature. As Bezos demonstrated how the phone could identify 100 million different objects, videos and even songs and link to purchase buttons (and third-party apps, as well), Amazon shares moved from unchanged to up almost 3% on the day. But a phone that makes it ever easier to buy things on Amazon only matters if some people buy the phone first. That's going to be be a big hurdle for the Fire phone.

And the new phone's pricing is just plain, ho-hum, boring. Pay $200 with a two-year contract or more than $600 on a pay-as-you-go plan. And by the way, you can only get one on AT&T’s (T) network with AT&T’s regular priced monthly plans.

Amazon has come a long way since it ignited the ebook market with the first Kindle ereader in 2007. That was dull hardware tied to an incredibly valuable service offering -- $9.99 ebook best sellers, free wireless connections and an always-available ebook store in your pocket. Bezos seems to have lost his way since then, at least as far as the Fire phone goes.

To be sure, Amazon can still market the phone on the top of its super-popular website. And the company’s hardware sales model entails taking little risk – the company hasn’t listed a single write-down for unsold inventory in its annual 10-K since the first Kindle ereader went on sale seven years ago.

There was much speculation in the days before the phone announcement that Bezos might have something tricky up his sleeve to up-end the mobile industry. When word leaked earlier this week that AT&T would have an exclusive on the phone, however, those rumors started to lose credibility. And Bezos had nothing special on pricing — no cut-rate phone price or monthly plans, no “Prime” data package, nothing.

Some years ago, a single carrier could drive a new phone to hit status simply by pushing it on hapless customers who came into its retail stores. There’s always a chance, however remote, that tactic could work for Amazon and AT&T with the new Fire phone.

But it seems like a pretty long shot.