What Amazon Brings to the Smartphone Market
And, while clearly a novice at making phones, Amazon brings a lot of know-how and relevant skills, which have already benefitted the company in the tablet space — Amazon has its own app store, Kindle book operation and digital music and movie services.
Those content businesses are important for two key reasons. First of all, consumers like being able to easily get their content onto their mobile devices, and to take advantage of content they already have access to.
Secondly, Amazon has the ability to make money on those services after the phones are sold, giving the company a potential recurring revenue stream that few other hardware makers can match.
While Apple has clearly been successful in this area, most other phone makers either don’t try or haven’t made inroads in selling content to consumers. That means Kindle could potentially have a profitable business even while undercutting rivals on the hardware side.
Indeed, a survey earlier this year found that consumers were more interested in a phone from Amazon than they were in one from Facebook.
Also, while it doesn’t already make phones, Amazon has been selling a lot of other people’s phones for a long time, and knows what customers are looking for.
Additionally, the company has proven its hardware chops with the Kindle and Kindle Fire, and might be able to tempt some folks who have been pleased with their other Amazon-made hardware.
The biggest unknown, in addition to what hardware Amazon has in mind, is how Amazon will handle the service piece. The most conservative approach would be if it partners with and sells through traditional phone carriers.
More disruptive — and potentially more intriguing — would be if the company pursued a different approach. With the original Kindle, for example, Amazon bought wholesale service from Sprint (and later AT&T) and bundled it into the cost of the Kindle and of purchased books.
While that might not be practical for a phone (with its higher monthly costs), the company could choose to buy service in bulk from one of the major carriers (or Clearwire) and resell it in the manner of its choosing.
The company also has some holes to fill. Because it uses its own version of Android, it won’t have direct access to many Google services. It handles many of those on its own already, but could use some added bulk in some areas, such as mapping. The company is said to have recently bought UpNext, a start-up in this area.
Additionally, as all the major players in wireless already know, it takes lots of patent power to be in the business. The Bloomberg article notes that Amazon is already working to improve its position on this regard as well.
Whatever the case, Amazon represents one of the most intriguing potential entrants to the phone market in some time.