Friday, September 6, 2013

Amazon Launching a Free Smart Phone? Maybe Not.

Amazon now says it has no plans to launch a free smart phone in 2013, despite rumors to the contrary. 

Precisely what that means for future launches is not completely clear. Amazon might have been planning a 2014 launch. Amazon might only have considered the economics of a "free" device, and decided against it. 

Or Amazon might later decide to do it. Firms often deny such rumors, even when they are substantively true. 

Amazon was said to be considering launching a “free” smart phone, according to technology writer Jessica Lessin

Since nothing ever is truly “free,” the question is what revenue model Amazon might have expected to use, or to have considered.

As Google’s answer might be “advertising,” Amazon’s answer would likely be “additional e-commerce sales.” Also, the “no cost” phone does not necessarily imply “free mobile service.” It seems unlikely Amazon would attempt that, and instead would simply create a way to distribute the devices, with users obtaining their own service on a third party basis.

Some might argue that could prove a boon for T-Mobile US, which already encourages its customers to consider devices and service two distinct and separate purchases.

As you would guess, such an effort would be a formidable undertaking. Some might guess that Amazon would bundle the phone with a required Amazon Prime subscription. That would provide an immediate $79 a year recurring revenue stream, and also encourage more people to take advantage of the streaming video and free shipping features Amazon Prime provides.

Ad sales might form part of the revenue stream as well, some would speculate.

Lessin says she has been told an Amazon smart phone would be powered by a “forked” version of Android.

The plan might not actually come to fruition, some also would argue, especially if Amazon cannot convince at least one manufacturer to build such a device, or if some of the leading mobile service providers decide not to cooperate, or if the revenue model cannot be solidified.

Up to this point, there arguably has been more thinking and experimentation about ad-supported services, compared to commerce or ad supported devices. But lower-end Kindles already partly defray manufacturing costs by displaying ads to users.

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