
Amazon exec: We priced the Fire phone wrong - denzil_correa
http://fortune.com/2014/10/30/amazon-exec-fire-phone-priced-wrong/
======
nkurz
How is it possible that this article talks about Amazon slashing the price of
the phone from $199 to 99 cents without ever mentioning that neither of these
are actually 'prices', but arbitrary numbers used by advertisers to make the
required $1000+ contract seem more appealing?

Lest anyone misunderstand, the 32GB phone actually costs $449 if you want to
buy one, and the quoted prices require the purchaser to sign a two-year
contract for service. I can see why the advertisers benefit from this
approach, but I can't understand why the public is complicit. Is it that
people don't want to think about how much they are actually paying?

~~~
IBM
I'm not sure why everyone seems to think carrier subsidies are a con. Amazon
isn't getting that $1000+, they get whatever the non-contract price is of the
phone. Carriers subsidize some of that cost in-exchange for some guaranteed
cash flow for 2 years.

~~~
eropple
The full freight of the phone, plus the cost of off-contract service with
somebody like Straight Talk ($50/month for unlimited everything for me, they
throttle me to 128Kbps after 5GB of data), is much, much cheaper than the
initial buy-in plus the delta of the monthly carrier bill.

The situations where carrier lock-in makes sense are few and far between
(generally around large family plans), and outside of those situations you're
paying hundreds of dollars extra over the life of the phone and the contract.

~~~
drawkbox
Pretty soon with all this throttling, people aren't going to be able to have
meetings, do large code pushes, video chats etc at the end of the month when
everyone's rigged data plans dry up.

The last few days of the month for me online is always spotty, slow, and
pretty much unusable.

We are being held hostage by our telecoms, slowing business to a crawl because
they want you to upgrade. I have upgraded to my broadband highest tier and
still get throttled, the extra speeds cause faster depletion of that bandwidth
limit on purpose. Speed and limits both need to increase.

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potatolicious
It wasn't priced wrong, they made the wrong phone for the price.

It is possible to produce a $650 off-contract phone (the only useful
comparison given the variance between carriers) that's desired. They just
failed to do this. The Samsung Galaxy flagships sell like hotcakes at this
price range.

They set out to make a premium phone and failed - they've cut the price and
the phone still isn't moving off shelves. I sincerely hope that this is just
PR-speak and that Amazon doesn't seriously believe pricing was the key point
of failure.

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ufmace
They don't even mention the real issue of the Play store, or lack thereof. The
real reason nobody seems to want it is that the apps aren't there, and they
tried to substitute some silly gimmicks in hope that nobody would notice. If
they Play store and the rest of the Google apps were there, I bet it would
sell fine at the original price. Without them, they're having trouble giving
them away.

Of course, that would mean kowtowing to Google, and the real purpose of the
Fire line of Android forks is get Amazon out from under Google's thumb.
They're welcome to try, but I'm not about to sacrifice my experience to help
them.

The deeper issue yet is the still open question of the third ecosystem. Apple
and Google have theirs already. It remains to be seen if there is room for a
third, but plenty of companies are opening their wallets to try. IMHO,
Microsoft looks to have the best shot at it now. For Amazon, it's hard to see
them pulling it off when the core of what they're working with is a fork of
Android. How are we supposed to believe that they're ever going to be better
than Google is at Android?

~~~
WildUtah
Amazon doesn't need Google to run a competitive app experience. The Android
APIs are mostly open source and Amazon can copy them.

The problem is that Amazon is hard on developers, doesn't let them set prices,
won't automatically approve new apps and upgrades, gives new apps harsh
conditions, and doesn't promote developers' apps to a large user base.

Amazon could have a better user and developer experience but thinks it's Apple
instead of Google. But only Apple is Apple.

------
adventured
"Still, $83 million of unsold phones is a lot, even for a tech giant like
Amazon."

The article refers to this twice, and I can't figure out why. That's not a lot
of unsold inventory compared to the disaster the Fire phone was. I would have
expected a much higher number than $83 million. That's equal to not quite 1%
of their cash. The real damage was to their reputation, that was a far greater
hit than $83 million. Dud products taint all of your other products by
association (especially those in the Fire lineup).

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kolev
I would never buy a phone that requires me to repurchase thousands of dollars
of apps, games, music, movies, books, etc. For the same reasons I stay away
from Kindle Fire. Until there's a consumer law requiring companies to honor
your digital purchases of the same intellectual property on difference
marketplaces, I'll stick with the devices running the monopolistic Google
Play.

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pinaceae
erm, they slashed it to 99c, as the article mentions, but it still has not
gotten any significant traction - full blown write off.

it's just a shit device by a company that seems to try to emulate apple on
some fronts, but without the taste or acumen for proper hardware and software.

AWS and Kindles are great. never seen a Fire tablet in wild.

~~~
WalterSear
Amazon's Lab 126 is micromanaged from two states away by Jeff Bezos. It's a
toxic environment where only yes-men can thrive. It doesn't help that Jeff
Bezos runs Amazon like a miserly cornerstore Wallmart - looking everywhere he
can to cut corners, to the detriment of his staff and his product.

I'm impressed that they have been able to iteratively improve on the Kindle.
Given what I have seen, I would hazard that with upper management's obsessive
spotlight focused on the Phone and Tablet, the Kindle developers have been
able to get on with their work.

The same may be the case for AWS - no longer a sexy new market, and
consequently able to get on with it's work.

~~~
kolev
I've heard terrible things about Lab 126 and I'm happy I've turned down
several of their job offers already. I hear backstabbing is daily business
over there, everybody can submit an anonymous reviews for your coworkers to
your manager, and the whole environment is a zero-sum game. I'm a big fan of
Jeff Bar, Werner Vogels, and, of course, Jeff Bezos, but, I guess, this is
another instance of "far from the sight, far from the heart"!

~~~
WalterSear
IMHO, Jeff Bezos is at the center of the problem.

~~~
kolev
You probably are right. I like him as the guy who shaped out Amazon the way it
is today (AWS and the store), but I'm not sure I'd be willing to work for him.
The whole Android forking and Appstore was a terrible idea although I
understand the motives.

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SiVal
The phone market, ironically, doesn't have network effects, because any phone
can talk to any other phone. But it does have _scale_ and _timing_ effects,
because developers decide which platform(s) to develop for, in part, by the
number of buyers, and buyers decide which platform to buy based on how well
developed, and both accumulate platform inertia over time that defeats any
minor advantages of later, alternative platforms.

The lack of network effects means that you _can_ get both developers and
buyers to adopt a new platform--it's not hopeless--but the scale and timing
make it difficult enough that any new phone platform now would need to offer a
_major_ advantage, or it shouldn't bother.

It would have to be something remarkable. Maybe Amazon, as a major retailer,
could have done something along the lines of Apple Pay, but where the phone
carrier got a cut of each purchase transaction in exchange for a special,
reduced rate plan that made Amazon phone take off as the standard phone for
schoolkids. Or Amazon stays close enough to standard Android to make
development easy for Android developers but then leverages their AWS to make
some sort of deal such as Amazon phone apps get _free_ server-side
infrastructure and services on AWS. Or anything ordered through the phone gets
Amazon Prime delivery and you can stream Amazon Prime video and music through
the phone for free.

Whatever, they need to come up with something that offers a remarkable
advantage to some market segment or not bother.

~~~
MBCook
Cell phone certainly have network effects, it's just that they're all
software. You're right the carrier doesn't really matter at this point but
there's no way I would switch from iOS to Amazon's phone because there just
isn't any software available. Even if we ignore the stuff I've already
purchased, there are tons of little games and utilities and other fun things
that are never going to come out for a fourth tier platform.

Even with all the money they have Amazon can't really force people to make
software for their phones. Microsoft has tried the "buying developers
mindshare" thing for Windows mobile and it hasn't worked well for them.
They're still in third place by a giant margin.

At this point you can't subsidize yourself into having a first-class software
ecosystem. It would just cost way too much.

And since Amazon doesn't want to be just another Android vendor, they're not
going to let standard Android software run on their phones. At that point they
need an insanely compelling feature to get people and "easy Amazon shopping"
isn't that.

Why should I get a phone for one dollar that has almost no software when I can
get an iPhone 5c for free on contract with a ton of software and accessories?
I know they're also good Android phones available free on contract.

~~~
SiVal
The network effect I'm talking about is the N-squared growth in value of a
network of N nodes where each of the N nodes derives most of its value from
the number (N-1) of other nodes. The phone system overall has this property,
so does Skype, so does Facebook, but no carrier, handset maker, or OS does,
because their users aren't limited to interacting with the other users of the
same carrier/handset/OS.

Instead, the existing players have a benefit resulting from their size that is
more of a scale advantage, in that the N users tend to have access to more
things if N is larger, but those "things" are not primarily the N-1 other
users. There are more iPhone apps than Android, for example, yet Android sells
more units and is growing faster. Scale matters, number of apps matters, but
other factors are very significant, too.

Apple, therefore, does not have to be the #1 phone maker to make the most
money, nor would a new entrant have to have huge scale to have a profitable
business. Unlike a network effect business, a new entrant would not have to
appeal primarily on the basis of how many other users it already had but,
instead, on what value it offered.

And you mention that Amazon couldn't get you to switch from iOS because of the
number of iOS apps as if the 2 billion phone users out there all care
primarily about the number of apps they'll probably never use. Yet Android
phones outsell iOS with fewer available apps, and the average Android user
buys far fewer apps than the average iPhone user. A significant fraction seem
to be satisfied with just the apps that come with the phone and never buy
another.

It's not unreasonable to assume that there may be many market segments that
would be fine with a few thousand apps covering 99%+ of usage PLUS something
_else_ they value more highly than the long-tail iPhone apps. Phones and phone
plans that specialize in offering something more valuable than Yet More Apps
might appeal to many people. Shoppers might care more about Amazon Prime than
than the one game app they have to give up if they switch. Parents might care
more about a managed kid phone with kid features and a kid rate plan than
about Apple's app store.

Since the value of phones is not primarily the number of your maker's
installed base squared but is based on so many possible things, I think there
is room for new entrants as long as they offer something more significant to a
market than the extra apps.

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ParvusPonte
The article mentions Amazon's Fire Phone 2-star consumer rating, but this
piece of information has to be taken with a grain of salt.

Phone's Amazon page was bombarded with fake reviews from activist groups that
are trying to get Amazon to switch to renewable energy sources:
[http://www.amazon.com/forum/top%20reviewers?_encoding=UTF8&c...](http://www.amazon.com/forum/top%20reviewers?_encoding=UTF8&cdForum=Fx2Z5LRXMSUDQH2&cdThread=Tx2KUEQB4ZJ9B8C)

~~~
philsnow
Even if you discard _all_ the one-star reviews, I wouldn't be excited about
the rest of the ratings.

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sigzero
It had nothing to do with price.

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mmanfrin
I was expecting them to meet the Nexus line at $299, since Amazon's M-O with
tech devices is to make them cheap, affordable, and locked in to their
ecosystem, a la the Kindle, Fire, TV, etc. I was going to buy one at that
price for the novelty of Amazon's first phone.

Then they released it at the price for the most premium phones on the market.

I'm pretty sure 95% of the tech world saw this coming.

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jrs235
Even at 99 cents I won't consider it. At&t is a non starter for me. In my
eyes, they got the carrier wrong.

------
bane
Features I didn't want; features I wanted it didn't have.

------
seanhandley
*wrongly

~~~
wbkang
Actually, wrong can be an adverb just like quick in 'real quick.' See:
[http://www.merriam-webster.com/dictionary/wrong](http://www.merriam-
webster.com/dictionary/wrong)

~~~
baddox
And, for the prescriptivists out there, don't fall victim to the recency
illusion. The usage of "wrong" as an adverb, like the usage of "they" as a
gender-neutral singular pronoun, is many centuries old.

