Rumor: Amazon Is Making a Smartphone, May Give It Away for Free

The Citizen's Guide to the Future
Sept. 6 2013 5:07 PM

Rumor: Amazon Is Making a Smartphone, May Give It Away for Free

Jeff Bezos: the "Crazy Eddie" of the tech world?
Jeff Bezos: the "Crazy Eddie" of the tech world?

Photo by Mario Tama/Getty Images

Here's one way to steal Apple's thunder.

Will Oremus Will Oremus

Will Oremus is Slate's senior technology writer.

Days before Apple is scheduled to announce a new, cheaper iPhone, sources are telling former Wall Street Journal reporters Amir Efrati and Jessica Lessin that Amazon could become the first tech giant to offer a smartphone for free, without a service contract. The report is far from solid, quoting anonymous "people familiar with Amazon's effort" and asserting only that the company is "considering" introducing the device for free. The story gets shakier from there, implying that there may be other financial strings attached, and then acknowledging that the free strategy "isn't set in stone." From the piece:

There are many unanswered questions about the plan and what strings will be attached for customers. One of them is whether Amazon would require its smartphone owners to pay for services such as Amazon Prime, the company’s loyalty program. But the people familiar with the matter said that Amazon wants the device to be free whether or not people sign up for a new wireless plan at the same time. ...
The free strategy isn’t set in stone and depends on several factors, including Amazon’s ability to work out financial arrangements with hardware partners, said one of the people who is familiar with Amazon’s smartphone effort. This person and others expressed skepticism about Amazon’s ability to pull off a free device.
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I second that skepticism. It's one thing to "consider" giving away smartphones and quite another to actually give away smartphones. But it's tantalizing to imagine, and if anyone company could do it, Amazon would be a leading candidate. The company's hardware strategy has been to use devices as loss leaders for Amazon's retail business. Actually, you could argue that Amazon's entire business is basically a loss leader for itself.

Recall, though, that there were also rumors at one point that Facebook might give away smartphones as a loss leader for its business of harvesting users' data. In fact, the "Facebook phone" launched with a price of $99. After it flopped, the price was cut to just 99 cents with a contract, but HTC found it could barely give the thing away.

Of course if Amazon handed out phones with no strings attached at all, they'd be gone in a jiffy. But the Facebook phone fiasco suggests that even the barest financial obligations may be enough to scare a lot of consumers away from a phone that they wouldn't be inclined to buy otherwise. So unless Amazon really is going to just start shipping scot-free phones until it runs out of them, the lesson is that the hardware itself is going to have to hold some appeal for customers in order to catch on.

Future Tense is a partnership of SlateNew America, and Arizona State University.