Kindle Phone is the second big Kindle family device rumored to be arriving this Fall (Fall 2013). The first is Kindle TV.
Let’s ponder over a few things -
- What do we know about Kindle Phone?
- What will the Kindle Phone Release Date be?
- Why Amazon needs a Kindle Phone.
- How will Kindle Phone do?
- What impact will Kindle Phone have on other companies?
- Kindle Phone Predictions.
Let’s start with what people are speculating about Kindle Phone.
Kindle Phone – What we know
Firstly, just to be clear, these are all rumors. None of this is guaranteed, regardless of how likely and logical some of it might seem.
Rumors and Speculation from earlier years -
- Way back in October 2011, David Carnoy at CNet was speculating about a Kindle Phone. He thought Amazon’s Lab126 would make a Kindle Phone and it would be premium quality, but be offered free with a 2-year subscription. He also thinks, and this makes sense, that it would be based on Android. That Amazon’s Android App Store is primarily meant to feed Kindle Phone (when it arrives).
- Even before that, in 2010, New York Times talked about a Kindle Phone. NY Times had brought up the notion of Lab126 building a Kindle Phone to compete with Google and Apple.
- In November 2011, Harry McCracken at PC World talked about Amazon making a Kindle Phone that was the iPhone of the Android world. He even suggested that Amazon might buy wireless service in bulk from Sprint or Verizon and resell it in a hassle free form. I think it’s a splendid idea (except for the fact that Sprint and Verizon might be in no rush to play along).
Newer rumors and speculation -
- At Fool.com (a strange name for an investment site), Adam Levy talks about the high probability of success of a Kindle Phone. He cites Xiaomi (a Chinese cell phone company that sold 7.5 million phones last year) as an example of the success possible by selling high-end phones at cost. Xiaomi plans on making money by selling services to these Xiaomi phone users. Adam Levy thinks this model fits perfectly with Amazon’s (it does).
- A few of the other suggestions in the Fool.com article seem strange. The claim that Kindle Fire has captured 22% of the US Market seems sketchy. Perhaps the sales results for the Holiday Quarter (when Amazon is supposed to have captured 22% of sales for the quarter) are being confused with total market share. The suggestion that Amazon might capture 22% of the US phone market is also a bit speculative.
There are lots of other articles we could look at. However, they circle around the same points.
Basically, all of Amazon’s moves are now being scrutinized as ‘possible signs’ that Amazon is getting ready to release a Kindle Phone.
Let’s move on to exploring when Kindle Phone might arrive, why Amazon needs a Kindle Phone (Note: Needs, not Wants), and how Kindle Phone will do.
Kindle Phone Release Date Estimates
Amazon has been running Amazon Wireless for quite a while now. One huge benefit is that Amazon can collect data about what subscribers want and what would make them buy a Kindle Phone.
Kindle Phone Release Date Estimates are tricky because -
- Past Amazon Device Release Dates suggest we’ll see – An October Kindle Phone Announcement and a November Kindle Phone release date.
- However, we don’t know what information Amazon has gathered from Amazon Wireless. Perhaps Amazon has figured out that the best time to launch would be in the summer lull – when the next iPhone is still far, far away. Perhaps it’s figured out that the Holiday Season is indeed the best time to launch.
- After considering all the factors, my bet would be that we’ll see a September Kindle Phone announcement and an October Kindle Phone release. That Amazon would try to release as close to Holiday Season as possible, but also try to come out a month or two ahead of Apple’s new iPhone. That has the dual benefits of reaching a large amount of people waiting to update their phone AND making sure Amazon can release as close to the Holiday Season as possible.
Now that Steve Jobs isn’t around, the Apple risk isn’t quite as high. However, releasing before Apple’s announcement would still be a good idea.
Why Amazon needs a Kindle Phone
Two main reasons. Profit. Profit.
- Firstly, consider the amount of Profit Apple and Samsung are making from smartphones. It’s almost absurd. We’re talking about $2 to $3 billion a month in profits. So, both #1 and #2 in the Smartphone market are making out like bandits.
- Secondly, consider the amount of Profit AT&T and Verizon are making from data plans. AT&T made $3.4 billion last quarter. That’s $3.318 billion more than Amazon. Amazon already has the Cloud. It already has the customer accounts. It already has the OS. It already has the App Store. All it needs are phones and wireless bandwidth.
We’re talking about an absolutely incredible amount of profit in both smartphones and in smartphone data plans.
Perhaps Amazon sees another market (twin market?) where it can destroy profits to gain customers. However, my bet would be on Amazon seeing an opportunity to go from a profit averse company to a profit loving company. Sooner or later Amazon will go after the data plans. By end of 2013, Amazon will go after Apple and Samsung.
Amazon Needs Kindle Phone.
There are very few other super high profit businesses that are right in front of Amazon. Advertising is one, and Amazon is already setting up things to take a giant share of that. Phones and Data Plans are two beautiful cash cows and Kindle Phone might be Amazon’s best opportunity to either keep them for itself, or destroy them and weaken two of its biggest rivals significantly.
How will Kindle Phone do?
Well, there are two possibilities -
- Amazon goes with a profit destroying approach. It sells phones at cost, sells data plans at close to cost, and focuses on adding Amazon customers and/or Prime subscribers to profit from in 2159.
- Amazon goes with a profit focused approach. It sells one out of phones and data plans at close to cost, and gathers profits from the second. In effect, it tries to profit from phones and plans now.
- If Amazon goes with the former approach, it’ll add a lot of customers. It will, however, lose the opportunity to add one huge cash cow. Perhaps even two huge cash cows.
- If Amazon goes with the latter, it’ll be a lower number of sales and a slower ramp-up in total Kindle Phone sales. It will, however, add huge Cash Cows. Cash Cows which might keep Amazon alive when the next big crisis and/or economic depression hits.
Quite frankly, I don’t see any scenario where the Kindle Phone doesn’t do well. That’s highly unlikely. Lots of people are willing to try out a Kindle Phone. Lots and lots of people.
Amazon has already demonstrated it can make decent hardware (not spectacular, but decent). Amazon has already gathered huge amounts of data on phone and phone plan purchases. Most importantly, Amazon already has a HUGE customer base that trusts Amazon. Now it just has to deliver a decent phone and a decent plan and it’ll be set.
Prediction: 10 to 20 million Kindle Phones sold in 2013.
Note: This is assuming Amazon goes with either a Phone that is close to cost OR it goes with both Phone and Phone Plan that are close to cost. In the extremely unlikely event that Amazon tries to pull off an Apple, Kindle Phone sales will be poor.
What Impact will Kindle Phone have on Other Companies?
This is the very interesting part.
Profit focused companies like Apple and Microsoft must wonder about the motives of companies like Amazon.
Kindle Phone is going to destroy profits and/or steal them.
If Amazon goes with a cheap Kindle Phone with cheap data plans then a LOT of companies will see profits go down – Apple, Samsung, AT&T, Verizon, and more.
If Amazon goes for profits, it’ll still lead to some customers leaving Apple and Samsung. Those two companies will definitely feel the pain.
It’s a lose-lose situation for Apple and other smartphone companies. It might be worst for companies like HTC and Nokia which don’t have a very strong US brand. It’s tough enough to compete against Apple (almost impossible in the US) and Samsung (so strong worldwide, somewhat strong in the US). Now you have Amazon which is incredibly strong brand-wise in both US and UK. 2 of the 5 most important markets gone.
A Kindle Phone would mean that the top 3 phone brands in the US would be – Apple, Samsung, Amazon/Kindle.
Makes things incredibly difficult for Nokia and HTC and Android Phone makers in general. Problems for Blackberry too as Amazon will steal some market share from Blackberry too.
Definitely a lot of bloodshed if Kindle Phone comes in at a low price.
Kindle Phone Predictions
Here are our Kindle Phone Predictions -
- Kindle Phone is announced in September 2013 and ships in October 2013.
- Two Kindle Phones. A mid-range model that is free on a 2-year plan and a premium model that will be $99 to $149 on a 2-year plan.
- Special Data Plans that come with Kindle Phones. First Year at a ridiculously low price with the 2nd and subsequent years at a normal data plan type rate.
- Kindle Phone will do very well. If Amazon offers just a low-price high-end phone it’ll sell 5 to 10 million units. If Amazon offers it for $0 with a 2 year plan, it might sell 10 million or more units. If Amazon offers both a low priced phone ($0 to $50 with a 2-year plan) and a reasonable plan, then we might see 12 to 20 million sales. Note: This is for the Holiday Quarter, and it assumes there is pent up demand for a well made yet cheap Android phone which comes with a decent data plan.
- Kindle Phone will have a material impact on Apple and Samsung profits. Kindle Phone will have a very large impact on all other phone makers.
- Kindle Phone plans will have a small but not insignificant impact on AT&T and Verizon IF they are low-priced and/or offered without long contracts.
- Kindle Phones will also be sold without contract but with a Prime Membership for $199 to $249 for the mid-range Kindle Phone and $299 to $349 for the premium Kindle Phone.
Kindle Phone is going to have much more of an impact than Kindle Fire. Kindle Phone gives Amazon an opportunity to flex its infrastructure muscle and also show off its ability to sacrifice today’s profits for tomorrow’s promise. Prediction: Amazon will go all-out and deliver a pair of low-price, high-quality Kindle Phones with very compelling data plan options. We’ll see 10 to 20 million Kindle Phones sold by end fo 2013.
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