How Long Will Fire Phone Stay On Fire?

Jianyu Zhao  | Inc. (AMZN) released its smartphone Fire Phone on June 18, making the company the fifth invader into the smartphone market. Before Amazon’s Fire Phone, several companies tried to take a bite in the smartphone market, including ESPN’s Sanyo MVP, Facebook’s (FB) HTC First, and Microsoft’s (MSFT) Windows Phone. However, they all flopped. Considering the giants of iPhone and Android devices and the prior failures, investors have to ask how long Fire Phone will survive in the market.

The Fire Phone ties seamlessly into Amazon’s media services, providing movie rentals, TV downloads, e-book borrowing, and Prime video and music streaming wherever users go. Apparently, Amazon’s Fire Phone serves as a channel to attract more customers to visit its website and to shop. In other words, the ultimate purpose of Amazon’s smartphone is to seduce people to be its Prime members and stimulate them to purchase Amazon’s services. Although people may be drawn to the Fire Phone’s new kind of 3-D display and Firefly image-recognition, they could be a gimmick that fails to impress customers.

Amazon, ESPN, Facebook, and Microsoft all had no prior experience  out selling phones. Sports broadcaster ESPN launched its independent cellphone (Sanyo MVP) and service in 2005, and had it flop in 2006. The Sanyo MVP featured “a high-resolution display, a 1.3-megapixel digital camera, a video and voice recorder, and an MP3 music player,” which was meant to deliver fresh ESPN contents. The Facebook phone, also known as HTC First, was first released in 2013, but soon vanished. Even PC giant Microsoft did not succeed in smartphone. After first launching in 2010, Windows Phone, though still lives, has been losing its market share. In the U.S., Windows Phone’s market share now is less than 5 percent.

As for ESPN’s Sanyo MVP, the reasons why it fails seem to be clear. Users can hardly enjoy videos or reading articles with its small screen. The second flaw is the short battery life. Can you imagine that your phone runs out of power when it is a crucial point in the game? ESPN’s phone was totally a disappointing device.

It’s still hard to understand why Facebook wanted to launch a smartphone. The Facebook phone officially became a disaster after AT&T (T) dropped its price from $99 to $0.99 in 2013. Generally, the reasons why Facebook phone failed pointed to three factors – unremarkable hardware, the lack of uniqueness, and fierce competition.

The Facebook phone lacked any of innovation. Compared to the all-metal HTC One, there’s nothing particular about it. Facebook Home is another selling point. Facebook Home dominates the phone’s user experience. However, the number of Facebook’s “extreme” membership is unclear. Even the figure is big; it does not demonstrate that hardcore users want to stick to Facebook 24-7. And if you turn the Facebook Home off, turning it into a decent little stock Android phone, then what’s the point of buying it all?  

Windows phone was first launched in October 2010, two years after the domination of iPhone and Android. Apparently, it was a bad time for Windows phone to step into the smartphone market back then. Again, compared to the iPhone and Android devices, there’s nothing exciting. Though Windows phone combines Xbox Live, Xbox Music and other Microsoft’s features, it somewhat neglects the basic purpose of people use a smartphone. Popular activities on a smartphone, except making calls, include browsing the Internet, checking social networks, checking emails, and listening to music. Can Windows phone provide better user experience than iPhone or Android devices does in these areas? If not, then why you buy it? No wonder the market share of Windows phone has been shrinking since 2012.

There’s a difference between having a phone and having a phone that people are willing to buy. Consumers do not buy phones just for social networking or just to transact or just to watch ESPN. Creating a successful mobile device depends on selling consumers series of attracting factors, such as price, innovation, brand and usability as well as a company's ability to market its product and work with mobile carriers. As a service provider or a handset manufacturer, a company has to deliver all developments.

Amazon has slowly built its reputation as a content provider offering television, movie, and most recently, music streaming through its Amazon Prime subscription service. Trying to copy the success of its Kindle Fire, Amazon wants its own smartphone in users’ pocket. However, the Fire Phone’s high price tag may not help it break into the high-end market. AT&T will set the phone for $200 with a two-year service contract, a standard deal in the U.S., or $650 without. Ian Freed, Amazon’s vice president for the Fire Phone, held a strong faith in the product, stating that for a premium device, Fire is a great value.

But that doesn’t change the fact that the faster-growing market is the non-premium segment. The average price of smartphones fell 10 percent in the first quarter compared with the same period last year, according to data compiled by Bloomberg. The average price tag was less than half of the entry-level Fire.

For now though, all speculations will have a rough answer until Amazon starts selling Fire Phone on July 25.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:

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