Yesterday, Amazon revealed its third-quarter financial results, and there was one very specific detail that those who follow the tech industry seemed to latch onto: the company took a $170 million write-down on the leftover inventory of unsold Fire Phone units. This comes despite its much heralded launch earlier this summer, as well as the phone’s ridiculous discount to just a buck roughly two months later.
In short, Amazon now has way too many Fire Phones that no one wants to buy, especially with Apple’s ridiculously popular iPhone 6 and iPhone 6 Plus, not to mention the bevy of Android phones that do more than make it easier for users to buy things off of Amazon.
Our own Shawn Farner called it accurately shortly after the Fire Phone was announced:
“Right away, Amazon’s Fire Phone faces an uphill battle. It’s the new product in a very crowded market. It costs just as much as more established products. It sports hardware that is capable of some neat tricks, but none of it feels must-have. And even if you’re heavilyinvested in Amazon’s ecosystem, you can choose a different smartphone and still access most of, if not all, of your content. And if you’re not into what Amazon offers, you can spend $199 elsewhere and get a better-looking phone, or a more open phone, and not feel like the manufacturer is trying to steer you toward buying something at every turn.”
His cynicism about the Fire Phone’s chances turned out to be well-founded. Personally, while I wasn’t interested in owning a Fire Phone, I was impressed by the potential of the Firefly feature and the glasses-free 3D effects were interesting enough to grab a few users who were less discriminating about their operating system preference.
In hindsight, it seems likely that the phone’s AT&T exclusivity was one of the main factors in the device’s poor performance. Back when the first iPhone launched and was exclusive to AT&T, there wasn’t a lot of choice in terms of getting a fancy, high tech smartphone. These days, however, consumers have grown smarter about what carriers they choose, and I can’t imagine that even today’s mighty iPhone could drive consumers to one carrier over others.
But beyond that, the Fire Phone simply didn’t do enough to make it that desirable a smartphone. Kindle Fire tablets are cheap and functional, and work well as consumption devices – which, of course, is really all tablets are for. Being tied into the Amazon ecosystem makes sense, since they’re devices built for laying around and watching movies or TV, or reading books, magazines, and the web. Smartphones, by contrast, do all this too – but consumption is secondary to function. The Fire Phone’s very reason for being is consumption, so users ignored it.
What will Amazon do now? Will customers get a free Fire Phone with orders over $25? Are they going to work on a new version of the phone for next year? It’ll be interesting to find out…