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Comment by r00fus | Hacker News Reader

My question remains - why did Amazon go for the high-end price point? Amazon has excelled previously by competing on price. While the Fire Phone is competitively priced to the corresponding iPhone or Galaxy (esp. given the freebies), it simply doesn't make up for the lack of Google Play or iOS AppStore. And chained to AT&T?

Perhaps this is Amazon's stalking horse into the phone market.

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From afar it seems like the US market can't handle phones that cost less than $600, so pricing at less than that has basically no effect on what the average consumer pays.

In the US most people[1,2] get their phones on contract, and a $600 subsidy is standard. If you plan to mostly forgo the prepaid market then US customers are cost insensitive, and pricing a phone at less than $600 is giving money away to the carriers. Similarly if a customer plans to stick with Verizon, Sprint or AT&T then they are throwing away money if they don't use the "free" upgrade on an expensive phone every chance they get.

My father-in-law recently realized that he had paid Verizon about $1200 extra for his Samsung Alias 2, and promptly switched carriers to one where you start saving money after 2 years.

[1]about 75M prepaid http://money.usnews.com/money/personal-finance/articles/2013...

[2] out of 327M total http://en.wikipedia.org/wiki/List_of_countries_by_number_of_...

I don't know about other carriers but AT&T has recently changed their model, so if you bring your own device (or buy one from AT&T at full price) you get a discount on your monthly bill.

I just bought an unlocked Moto G for ~$200, which is honestly a good enough device for my needs and a huge money savings over paying $200 up-front, plus an additional monthly charge, for a flagship device.

I see that they offer a discount for BYO devices now. That was not obvious to me earlier, even after looking at their web page.

Cell phone pricing should be a simple formula, but it is surprisingly difficult to find a good comparison of costs for an iPhone (or similar) from all of the different companies. What is AT&T Next, for example. The implications of paying $32/month and then saving $15 on the bill are not obvious.

Getting us to call these usurious loans "subsidies" is probably the most ingenious bit of underhanded marketing the cell carriers ever concocted.

I think you should generally be suspicious when a vendor tries to get you, the customer, to use the vendor's own internal jargon. As a customer, I shouldn't need to know your jargon; I don't give a shit about your internal policies and terms. If you're encouraging me to speak your unnatural language, you're probably trying to give me a false sense of security and savvy that makes it easier to pick my pocket.

One sees similar moves in many complicated transactions like real estate, automobile leases and purchases, etc.

"usurious loans"

Beyond the correct analysis of marketing-speak the market looks like contract phones are basically a "worse than payday loan" interest rate of a couple hundred bucks and couple year payback period. So you get a $500 phone at a cost of maybe $2000 over the course of the loan. The MVNO resellers mostly seem to go prepay, I know I paid $300 for my phone some time ago, but I only pay $22 per month for voice and psuedo-unlimited data so I'm pretty happy.

It is interesting that Amazon is kinda in between, kinda a subprime loan seller and kinda a phone service reseller, probably for financial reasons.

Amazon does seem to be financializing itself, they do push their credit card every time I buy. It is no great modification to drift sideways into phone loans.

In the long run I expect to see them continue to financialize themselves into perhaps subprime car loans (outright buy Car Max or a competitor?) and eventually home equity loans (to buy more stuff at Amazon) or home loans (complete with prime membership to help fill your house with trinkets from china)

So it makes sense as a grand strategy thing to move away from Amazon the book retailer and into Amazon the bank. Nobody in America can make a living doing anything but FIRE sector in the long run by intentional regulation, so they kinda have to do this.

What carrier is your $22 pseudo-unlimited data though? I'm looking at some alternatives and T-Mobile's $30 unlimited seems like a decent bet. But $22 for pseudo-unlimited would still be a step up from AT&T's 300 MB plan that I'm on.

I pay $25 a month for actually unlimited data and text and talk. Republic Wireless can afford to do this because they are a wifi first provider meaning that when I make calls at home or at work it goes over wifi costing them nothing.

Thank you. I've been grumbling about subsidies for a long time, while still calling them subsidies. You're right though. They're extremely high-interest loans that nobody in their right mind would ever willingly take out.

Hear, hear. T-Mobile calls it what it is - a 0% rate equipment loan. That's what shows up on my statement.

This is absolutely correct.

Additionally, even if you like the cost structure of prepaid service better, you can't buy the same quality of service. The prepaid networks (and resellers like Cricket, etc.) are limited to a single carrier's network, and there are no roaming agreements for prepaid customers. So where a Verizon contract holder could hop on to a Sprint tower, a Verizon prepaid customer will have no service. Same with the other networks.

Most MVNO's do not offer roaming, but a few do. I am currently using Republic Wireless, which is Sprint based, but includes all of the regular Sprint roaming on Verizon.

$20/month for unlimited Voice, Text, and Data! Really.

The downside is that they only have a few phones to pick from, and I will probably in a few months for a provider with an iPhone option.

Subsidies on smartphones have traditionally been $400 to $450, not $600. Most current-generation iPhones have still required a $200+ upfront purchase on contract.

I hate this system, which is why I have a MotoX on Republic Wireless. I paid $300 for the phone and $25 a month for unlimited everything.

All three major U.S. carriers now offer plan rate discounts for buying the phone up front. E.g. AT&T offers $15-25 off per month, or $360-600 over the life of the plan. And of course T-Mobile doesn't subsidize at all.

I see amazon as a technology company for the 35+ non-tech demo. They're original core biz was book selling on the internet (I will let you decide where the core is now). They carved a niche for themselves in rackspace, but their retail has always been aimed at regular people. They are offering a phone at a competitive price point (after subsidy) that will have access to a massive amount of media (prime video, ebooks, audiobooks, their cloud infrastructure) and above all else, they have a reliable brand that will stand by their product and walk newcomers through using it. People who need a smartphone and are still intimidated by technology. The answer to Siri might just be a real live person (it will certainly work better short term, especially for UX) so I will let you decide if this price point makes sense. Virtually everyone buys contract phones and frankly live support, cloud access, media access, what will be a robust ecosystem, as well as what sounds to be a fantastic and powerful phone doesn't sound over prices @200.

One view is that , as far as eCommerce , mobile is really hard(very low conversion rate) and nobody has yet cracked the formula.This could be a very big risk to amazon if someone cracks it before them.

So they want to find the formula to do it right.and they must do it alone - because sharing data with others is risky. One good bet on the formula is a physical shopping button and the whole button thing. So they try.

But since it's only a trial and not a full fleshed phone with a business model(maybe it was at some point, but competition is hard and changed that),It makes sense to offer it in limited volume - more economical, easier to try new things over smaller groups, etc.

So the price is in order to sell to a few, but once they crack the formula, they prices will probably go down.

This same "trial" theory could also be true for mayday - because customer support is expensive ,but very valuable for a retailer.

One reason may be the same reason Apple don't sell a truly low cost, budget iPhone. Some people who can afford to spend more, and otherwise would spend more if their only options were more expensive Amazon phone, would buy the cheaper model. That's revenue you just threw away. If there is a premium market for an Amazon phone, it makes sense to cash in there first.

Another reason is that this may well be Amazon's budget smartphone in 1 year, 2 years or 3 years time. Pay one tranche of development costs now and ride the economic price curve down to lower production costs and higher market penetration.

Well with the contract, the phone is $199. If you then do the mental math of adding a free year of prime, a consumer can justify that as another $99 off, bringing the phone down to $100 in their head, which is considered "cheap."

Another guess is: they are competing on price. Nobody else can offer a mayday like service at that price point.

If that is it, you're redefining what it means to compete on price. In fact, it's the definition of non-price competition [1].

[1] http://en.wikipedia.org/wiki/Non-price_competition

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