What You Need to Know About Amazon’s New Fire Phone

It’s official: Amazon.com (AMZN) is in a phone business. Chief Executive Jeff Bezos showed off a black potion rectangle with a rubber support called a Fire Phone. The device will be sold, starting Jul 25, by ATT (T) for $199 with a two-year contract, a same cost as other high-end smartphones.

The shade on Amazon’s phone is incomparable than Apple’s (AAPL) iPhones though smaller than phones done by Samsung Electronics (005930:KS). The processors and chips are on a standard with some-more absolute Android phones. Sure enough, a Fire Phone includes what Bezos calls “dynamic perspective,” a underline that uses 4 cameras to emanate 3D imaging that doesn’t need glasses.

But what creates a Fire Phone truly Amazonian is a Firefly Button. By dire it, users can use a phone’s camera to commend (and purchase) earthy products or a microphone to listen to (and purchase) songs. Bezos says that a module recognizes some-more than 100 million items. A Tumblr (YHOO) of random Firefly purchases seems inevitable.

The Fire Phone is a second space-age offered device to come out of Lab 126, Amazon hardware division, so distant this year. A wand called a Dash, accessible usually on a singular basis, allows users to indicate grocery items. The Fire Phone is a same thing, though with a possibility of reaching a non-wand-buying masses.

The vigour to do something like this has been ascent for years. Without a possess hardware, Amazon couldn’t emanate a possess offered apps though pity a deduction with intermediaries, such as Apple, that takes a cut of any purchases done on iPhone apps. Amazon has always survived on little margins—letting another association take a large cut was apparently a overpass too far.

The smartphone marketplace has gotten too large for Amazon to ignore. There will be 1.76 billion smartphone users worldwide this year, according to eMarketer, and a series of new smartphone business is flourishing rapidly. But a fast-expanding marketplace isn’t indispensably easy to mangle into. Apple and Samsung dominate, accounting for about 70 percent of U.S. smartphone sales. Rival products, such as HTC’s (2498:TT) One and a Nokia (NOK) Lumia have been good reviewed though creation most of a dent.

Amazon will face some of a same problems that have weighed on these companies. Like a Windows Phone Store, by that Lumia users buy apps, Amazon’s Appstore has a comparatively meagre selection. Amazon offers 240,000 apps, fewer than a entertain of a apps accessible in Google’s and Apple’s stores. When HTC expelled a initial chronicle of a HTC One, it had difficulty distinguished deals with carriers, contributing to unsatisfactory sales. Amazon is in a identical situation, given a Fire Phone is accessible usually by ATT.

Amazon’s advantage is that it’s not unequivocally a phone company, creation it easier to prerogative a users with easy entrance to a rest of a services. Last week a association rolled out a digital-music service, adding it to a streaming-video and e-book lending programs. All are giveaway for people who compensate $99 for a membership to Amazon Prime. “They have a ton of credit-card numbers already, they have entrance to a ton of digital video and music,” says John Fletcher, an researcher during SNL Kagan. “What sets them detached is a shopping.”

Nor does Amazon have to figure out how to make income only by offered phones. The association has traditionally used hardware as a detriment personality to sell some-more goods. When it introduced a Kindle Fire, for instance, Amazon undercut a iPad and bought itself a conduct start as a wider inscription marketplace practiced to offered smaller, cheaper devices.

It’s not so elementary this time around, says Chetan Sharma, an attention analyst. “In a smartphone space, things tend to be different. since we can get a one-generation-old iPhone or Galaxy for most nothing,” he says. “You have to contest with zero.”

In a final few days there has been conjecture that Amazon would cost a phone next a iPhone and Galaxy lines, though that isn’t unequivocally a case. The plaque cost is still $200, nonetheless it comes with some-more memory than analogous offerings from a dual widespread rivals. But Amazon’s phone also comes with a giveaway one-year Prime membership, that creates a phone seem cheaper—and, of course, inspires some-more sell activity elsewhere in a Amazon empire. Prime members spend about twice as most income on a site as non-Prime members.

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