Amazon wants to drop a bombshell in the mobile arena by offering its rumored smartphone for free with or without contract, but really, that’s nothing new coming from the e-commerce giant. The thing about Amazon is they have been selling their devices at-cost forever. Amazon is able to sell its Kindle and e-reader hardware so cheaply because the company is making money from its software and services (including all the products it sells, media content, etc).
The average cost of manufacturing a smartphone is around $200 so if Amazon were able to pull off getting these things into people’s hands for free it would mean they need people to spend at the very least $200 in the Amazon ecosystem to break even, though likely more as Amazon doesn’t keep 100% of every sale they make. Obviously those numbers will vary amongst customers, everyone spends differently — some more than others, some less. Even still, lower cost (or perhaps free) smartphones is something that tech giants are pushing for, especially Google/Motorola. Remember Dennis Woodside’s comments from D11?
Would it be incredible if Amazon is able to pull off this completely free smartphone? Yes. Would it be surprising for Amazon? No.
Amazon is in a really unique position compared to the other tech giants — they have a ton of software, services, products, etc to sell people, hell you can basically buy anything on Amazon and get it super fast. Did I mention I love Amazon Prime? It may be one of the best deals on the Internet — $79/year for free two day shipping on Amazon.com and free access to a growing number of TV shows/movies on Amazon Instant Videos.
Speaking of TV shows/movies, Amazon has pretty much anything and everything you would want to watch. They also have an amazing MP3 catalog. Amazon’s media content is probably the closest of any competitors to matching Apple’s offering. Dare I say it’s as good as Apple’s iTunes store?
If Amazon has deficiencies it’s in the company’s App Store offering. Right now, the Amazon App Store isn’t even on the same planet as Apple’s or even Google’s, but they do have a number of the big name app titles, including some games, which may be enough for it to float on by due to the fact Amazon has such strong offerings in other areas.
Which brings me back to the point: Amazon is in a very unique situation. You know how all these other tech giants want to be devices and services companies? Amazon is the epitome of a devices and services company and I don’t think anyone is giving them enough credit.
So regardless of whether or not Amazon is able to pull of this free smartphone attempt, perhaps Microsoft could learn a thing or two from Amazon.
Update: Amazon has contacted Jessica Lessin’s team and informed them that Amazon has no plans to launch a smartphone this year and that it would not be free. That however doesn’t mean it won’t be cheap.