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Does Amazon lose money on each Fire Phone?

Editorial by Luke Jones on Tuesday July 29, 2014.

amazon fire phone · editorials · amazon news · android news · smartphone news · luke jones

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Fire Phone cost
Fire Phone cost

Amazon's hardware has always been a conduit to get consumers to buy things from the retail business that built the company. That is why the Kindle range has always been affordable and high spec'd, simply because Amazon was willing to take a loss on each one sold to get consumers into the online store. It is a model that worked for the company's tablets and e-readers, but what about the recently launched Fire Phone smartphone?

The new handset boasts high specs, so that is one side of the model in check, but it does not have the affordable price tag. In fact, the Fire Phone costs $199 on contract ($649 without), the same amount as other flagships like the iPhone 5s, LG G3, Samsung Galaxy S5 etc. Indeed, considering it is only a moderately good product, there is a case for saying that Amazon's smartphone is expensive.

So what happened to the model of sell them at a loss you may be thinking? Actually it is still in place as Amazon actually loses money on every Fire Phone sold on a $199 contract or for $649 off contract. The company has always set the entry bar fairly low to get people into its ecosystem, so why has the bar gone so high for the Fire Phone?

It actually turns out that Amazon spends $205 on materials alone when it build the Fire Phone, not to mention construction and labour costs as well as marketing and shipping. As most Fire Phones will be sold on the $199 contract, we can already see that the company has indeed stuck to its model. However, a glance at the Fire Phone's specs do not reveal an outwardly expensive piece of hardware.

It boasts the same Qualcomm Snapdragon processor that a great many devices have, while its 720p panels at $27 each are actually value for money ($43 for the iPhone 5S screen and $63 for the GS5 screen for reference). However, the features that Amazon hoped would set the Fire Phone apart bump the cost of the device considerably.

Of course, we are talking about the array of sensors that make the 3D and camera tech work to move the screen as the user tilts their head. These components have likely driven up the production costs of the Fire Phone and ultimately resulted in its high price tag. Over the term of a contract or an off contract purchase, Amazon may well make some money, but the margins are not high and the company may not make any money period.

Considering the so called stand out features still feel unfinished and gimmicky, we wonder if it was worth including them. Amazon seems to think so and is hoping the Fire Phone will drive more consumers into its overall ecosystem.

source: re-code

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About the author

Luke Jones
Luke Jones is the Managing Editor at MobileBurn.com and is the person you need to speak to about the content on the site. Luke studied creative writing at degree level before carving out a reputation as a freelance tech writer. He settled here at MobileBurn, where he reviews devices and contributes to the news, as well as overseeing the site's content and direction.

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