Amazon isn’t just working on a phone, but the company is considering giving it away, anonymous sources have told ex-Wall Street Journal reporter Amir Efrati. The same sources say that Amazon’s plan to give away phones is unlikely, but the fact that Amazon is even thinking about such a plan is indicative of the company’s long-term strategy, which is to give away hardware while making money on content and advertising.
Amazon has for some time been open about its strategy of making little or no money on hardware, and there has long been speculation that eventually the price of its Kindle e-reader will drop to 0, when the price of hardware declines to the point that Amazon calculates it can recoup the cost of devices from sales of ebooks. And unlike its competitors, as a whole Amazon is content with making little or no profit.
As outrageous as a free smartphone might sound, it’s worth remembering that the price of low-end Android smartphones is already approaching $50. If Amazon thinks it can make more money selling content on a phone than on a tablet or e-reader, or perhaps by taking a cut of the costs for pre-paid wireless data plans, a complete subsidy of the lowest-end smartphones might make sense.