Amazon’s phone pricing actually is not disruptive at all

No pricing pressure here.
No pricing pressure here.
Image: AP Photo/Ted S. Warren
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Amazon had an opportunity to shake up the wireless industry with radical pricing for its new Fire Phone. But it’s actually quite conventional.

The Amazon phone, unveiled today, will cost about the same as most other good smartphones: $199 or $299 with a two-year contract and $649 or $749 unlocked, depending on storage capacity. And its exclusive US carrier partner AT&T isn’t offering anything special, either. (No word yet on international carriers.)

The one carrot Amazon is dangling to potential customers: For a limited time, it will give Fire Phone buyers a free year of its Prime service—a $99 value, which includes free two-day shipping on Amazon orders, video and music streaming, and some free Kindle books. Existing Prime customers can extend existing subscriptions by a year. That’s a nice bonus, and might be enough to convince Amazon devotees to switch phones. But it’s hardly revolutionary.

What might have been?

If Amazon wanted to do something radical, it might have offered a very inexpensive phone, subsidized by the high likelihood of increased spending on Amazon. Or it could have extended the same discount it offers Kindle and Kindle Fire buyers who agree to see ads on their lock screens.

Better yet, Amazon might have negotiated disruptive pricing for wireless service, such as data-only packages, free international roaming, cheap prepaid service, or just simply more aggressive overall pricing. That might convince a lot of people to buy a Fire Phone instead of an iPhone or Samsung.

Instead, Amazon has taken a somewhat surprising, more conservative path, hoping its unique features—a 3D interface, Prime media, free unlimited cloud storage, and Firefly product-recognition software—will sell enough Fire Phones on their own.

This may prove to be a better strategy in the long run: pushing the Amazon platform as an equal to Apple’s iOS and Google’s Android, instead of trying to be a cheap player in an industry that’s already getting commoditized on the low end. But it’s perhaps a tougher sell today than if this intriguing new phone were also competitive on price.