Amazon Fire Phone
From Invertopedia, the encyclopedia of how things fail
Amazon Fire Phone was Amazon's first smartphone. It was announced on June 18, 2014[1] and went on sale on July 25 as an AT&T exclusive, at $199 on a two-year contract[2]. Six weeks later the contract price was cut to 99 cents[7]. In October Amazon booked a $170 million charge, mainly for Fire phone inventory and supplier commitments, with about $83 million of phones still unsold[3][5], and by September 2015 it had stopped selling the phone[6][8].
Contents
The bet
Amazon believed a phone built around its own services would sell at the same price as an iPhone 5s[9]. Its hook was Dynamic Perspective, a 3D-looking interface driven by four front cameras that tracked the user's eyes[1][10], and Firefly, a dedicated button that recognized things and sounds around the user and linked them to purchases on Amazon[1][10].
Every phone came with a year of Amazon Prime[2]. The phone ran Fire OS, Amazon's version of Android without Google's services[1]. The idea was that people would pay full price for a phone that made Amazon's store easier to reach.
What happened
| Jun 18, 2014 | Amazon unveils the Fire Phone at an event in Seattle. Pre-orders open the same day for a July 25 ship date.[1][10] |
|---|---|
| Jul 25, 2014 | On sale at AT&T and Amazon: $199 for 32 GB or $299 for 64 GB on a two-year contract, plus a year of Prime.[2] |
| Jul 26, 2014 | VentureBeat says Amazon "oversold" Dynamic Perspective and sums up Firefly as "more novelty, not utility."[9] |
| Sep 8, 2014 | The 32 GB contract price drops from $199 to 99 cents, and the full price from $649 to $449.[7] |
| Oct 23, 2014 | Amazon reports a $544 million operating loss and a $170 million charge "primarily related to the Fire Phone inventory evaluation and supply commitment costs."[3][11] Shares fall almost 12 percent in after-hours trading.[11] |
| Oct 30, 2014 | Devices chief David Limp tells Fortune: "We didn't get the price right."[5] |
| Aug 2015 | Amazon lays off dozens of engineers who worked on the phone at Lab126, its hardware lab.[8][12] |
| Sep 2015 | Amazon lists both models as "currently unavailable" and says it has no plans to restock them.[6][8] |
The kill shot
It was a shopping funnel dressed as a phone, sold at iPhone prices. It asked people to pay a premium to make it easier for Amazon to sell to them.
The phone's two signature features served Amazon more than the owner. Dynamic Perspective was a demo; VentureBeat found it worked in games but was "little more than a novelty" in maps and rarely showed up anywhere else[9]. Firefly's job was to turn things in the real world into Amazon product pages[1][10].
The price did the rest. Amazon customers expected a bargain, and the phone launched at the same $199 contract price as an iPhone 5s[9]. Limp later said Amazon had "sort of mismatched expectations"[5]. Cutting the price to 99 cents helped sales, he said[5], but Amazon still ended September with about $83 million of the phones on its books[3].
Red flags ignored
- Premium price, no premium reason. It cost the same as an iPhone 5s on contract[9], from a company whose customers, its own devices chief said, expect a great value.[5]
- One carrier. In the US it was sold only through AT&T.[1][2]
- No Google. Fire OS was based on Android but left out Google's services.[1]
- Features nobody asked for. The 3D effect and the buy-anything camera were the headline, and VentureBeat's reviewer found little everyday use for either.[9]
The cost
A $170 million charge in the third quarter of 2014, mainly for Fire phone inventory and supplier commitments, and about $83 million of phones still unsold at the end of September[3][5]. The quarter's operating loss was $544 million, against $25 million a year earlier[11], and its net loss was $437 million[4].
The phone was a sales flop: Phandroid put sales at about 35,000 units[12]. Within about 15 months of launch it was gone from Amazon's store[6].
The inversion
Build the product for the user's goals, not for your own sales funnel. If it costs what the leader costs, it has to be better at what the buyer wants, not at what you want to sell them.
What survived
Amazon's other devices. When the phone was dropped, Amazon was still selling its Kindle and Fire tablets[6]. Lab126, the lab that built the phone, cut dozens of the phone's engineers in 2015 and Amazon scaled back its device plans[8][12].
References
- ^ “Amazon unveils the Fire Phone with eye-tracking tech”. GSMArena, June 18, 2014. The June 18 announcement, AT&T exclusivity, $199 and $649 prices, July 25 ship date, four-camera Dynamic Perspective, Firefly, Fire OS without Google's services.
- ^ “Fire, First Smartphone Designed by Amazon, Now Available at AT&T and Amazon”. Amazon press release, July 25, 2014. On sale July 25 at AT&T and Amazon, $199 and $299 on two-year contracts, a year of Prime.
- ^ “Amazon Reports $170 Million Writedown Due to Unsold 'Fire' Phones”. Reuters via Entrepreneur, October 23-24, 2014. The $170 million Q3 charge for unsold phones and supplier commitments, about $83 million of Fire phone inventory.
- ^ “Amazon takes $170M charge on Fire phone”. Mobile World Live, October 24, 2014. The $170 million charge, CFO Tom Szkutak's explanation, the $437 million net loss.
- ^ “Amazon exec: We priced the Fire Phone wrong”. Fortune, October 30, 2014. David Limp's "We didn't get the price right" and "mismatched expectations" quotes, the $83 million of unsold phones, better sales after the 99-cent cut.
- ^ “Amazon scraps Fire Phone”. Advanced Television, September 11, 2015. Amazon stops selling the phone about 15 months after launch, lists it as unavailable, no plans to restock, still sells tablets.
- ^ “Amazon Fire Phone drops to 99 cents after just over a month”. Droid Life, September 8, 2014. The cut from $199 to 99 cents on contract and from $649 to $449 full price.
- ^ “Amazon's smartphone "Fire Phone" finally ceased sales”. GIGAZINE, September 10, 2015. Both models "currently unavailable", stock sold out in August 2015, Lab126 layoffs.
- ^ “Amazon's Fire Phone is a nice piece of gear with some not-very-useful parlor tricks”. VentureBeat (Mark Sullivan), July 26, 2014. Priced the same as a 16 GB iPhone 5s; Dynamic Perspective "oversold" and "little more than a novelty" in maps; Firefly "more novelty, not utility."
- ^ “Amazon introduces Fire Phone with 3D Dynamic Perspective”. Notebookcheck, June 19, 2014. The Seattle event, head-tracking cameras, Firefly's side button and buy-from-a-snapshot.
- ^ “Amazon stock dives after it announces a $437 million loss”. BuzzFeed News, October 23, 2014. The $544 million operating loss, Szkutak's quote on the charge, the after-hours fall of 11.8 percent.
- ^ “You're Fired: Amazon shelves Fire Phone, dismisses workers”. Phandroid, August 27, 2015. Dozens of Lab126 Fire phone engineers laid off; about 35,000 units sold; Amazon scaling back devices (citing the WSJ).