More than seven years after Apple introduced the iPhone, Amazon will unveil its first foray into the market with the launch of its own device. The company is jumping into a crowded and hyper-competitive smartphone arena dominated by deep-pocketed rivals such as Samsung and Apple, as well as lower-cost rivals from Asia, even as sales growth slows in some markets that are saturated.
Amazon.com CEO Jeff Bezos wants control of the smartphone home screen so he can put more of the company’s services squarely in front of consumers. “Imagine a home screen of all Amazon apps – that’s kind of what they are looking for,” said Carl Howe, an analyst at Boston-based Yankee Group. Michelle Taylerson, a spokeswoman for Amazon, declined to comment.
By introducing a handset, Amazon can more directly push access to its online store, or digital content like music, movies and games, to consumers. A smartphone also adds to the growing line-up of tablet, e-reader and other hardware that can help Amazon circumvent Apple, Google and Samsung, which serve as digital gatekeepers by controlling how applications and media reach customers on mobile gadgets. A smartphone underscores how far Amazon has moved from its roots as an online bookseller. Just as Apple has the iTunes store so consumers can buy music and videos, and the App Store for downloading mobile apps, Amazon now has similar services. The web retailer said this week that its app store has tripled its titles over the past year to more than 240,000 programs, primarily for its tablets, and is available in almost 200 countries. Its $99-a-year Prime membership for unlimited shipping also provides access to movies, television shows and music. Yet the smartphone industry is an increasingly complicated market to navigate. The devices generated sales of $338.2 billion last year, up 21 per cent from 2012, according to researcher IDC. Much of the growth has been coming from developing countries like China, where local manufacturers like Lenovo and Xiaomi are gaining popularity. In the US, where Apple and Samsung are the biggest players, growth is slowing. Those willing to spend big on smartphones also aren’t always successful. Google bought Motorola Mobility as part of a $12.4-billion deal in 2012 and subsequently created its own smartphones, such as the Moto G. The handset unit had just 6.3 per cent of the market at the end of February, according to ComScore Inc. Google is now rumoured to be in the process of selling the business to Lenovo for $2.91 billion. Consumers may also not get as full an array of services through an Amazon smartphone as through other devices. The company is embroiled in contract negotiations with media companies including Hachette Book Group and Warner Bros over the cut of sales of certain products, resulting in limited inventory of some titles. Still, Amazon has shown a willingness to sacrifice profits if it means gaining customers. Of its $19.7 billion in sales last quarter, the company generated $108 million in net income, or less than 1 cent of profit for every dollar of revenue. Those margin-pinching ways have been under scrutiny from investors, who have pushed the web retailer’s stock down more than 18 per cent this year. To distinguish itself, Amazon’s handset is anticipated to feature 3D viewing capabilities that don’t require glasses. Carl Howe said that Amazon also could introduce a new pricing structure like Republic Wireless, which offers cheaper monthly plans because the service uses wi-fi connections whenever possible, instead of connecting to a wireless network. Bloomberg News, edited by ESM
