Amazon’s Motivation For A Smartphone

Word is that Amazon is supposedly considering a smartphone for the Kindle lineup. They are apparently lining up suppliers, and building a patent portfolio to try to forestall the usual legal shenanigans. But why would Amazon bother? I’ve always argued that Amazon is a content company first, and any hardware they make is to sell  more content. Amazon’s goal here isn’t to take over the hardware market. Their goal is consistent with everything they’ve done: lower the barrier to entry to get at their content.

Hardware Provides Access To Content

Consider what Amazon has done so far. They started with dedicated eReader devices, using “eInk” technology, that provides a reading experience similar to paper. The screen is matte and non-reflective. Like paper, it requires some kind of external lighting to read under low-light conditions. The batteries can potentially last for weeks. They are light, portable and reasonably durable. And they started at a reasonably low price, and have dropped in price as they have improved in implementation.

That only got Amazon book consumers. When smartphone started to take off with consumers, Amazon got into the game with a Kindle reader app for smartphones. Tablets from Apple, Samsung and others expanded the appeal for Kindle on a larger-form factor device. But Amazon has more than just books now. They offer movies, TV shows and music. While their original Kindle could play music, it wasn’t suited for video. The 3rd party tablets could support video, but not necessarily from Amazon.

That gave rise to the Kindle Fire, Amazon’s way of giving people who want a tablet (and a more versatile Kindle) but aren’t prepared to pay the prices that Apple and others currently command. Amazon sold quite a number of them when the came out just before Christmas, but apparently sales have tapered off. But the device did its job: it got people who otherwise wouldn’t have bothered with a tablet to get a tablet, mainly to consume Amazon content.

Lowering Another Barrier

But there is still a hole: smartphones. Yes, you can get really cheap smartphones (or even free smartphones), but only if you are willing to sign up for a 2-year or 3-year contract. An inexpensive smartphone from Amazon, presumably not tied to a particular carrier or long-term plan, would address many of those who want a smartphone, but don’t want to pay the steep price to avoid the contract, or enter into a long contract go get the cheap phone. Again, it lowers one more barrier to Amazon’s content.

I continue to maintain that Amazon’s goal is ultimately about their core business: content. If they do build a smartphone, it won’t be to take away sales from Apple, Samsung, HTC or Motorola. It won’t be to dominate the smartphone space. It will be about ensuring that there is a cost-effective option for people who want Amazon content, but without strings and conditions. It is consistent with everything else Amazon has done so far.

Not Really A Threat

None of the mainstream smartphone manufacturers need to see an Amazon phone as a threat. It won’t be. Hardcore phone users will buy their iPhones, Galaxies and Droids. They will want devices that are more robust, more powerful or have sufficient battery life. But for those out on the periphery, who want something cheap, the Amazon phone may fit the bill. Those aren’t lost sales for Apple, Samsung, etc. They were unlikely to be customers. Some would never have been customers. Amazon will be able to attract some, not because of the hardware itself, but because of what the hardware enables them to do.

An Amazon smartphone makes sense for Amazon’s business. It would enhance their business model, and help increase consumption of content. The easier their content is to get at, the more they will sell. A smartphone helps with that mission.