A free Kindle phone could hurt Apple, Samsung and Google.
Unnamed sources recently told former Wall Street Journal writer Jessica Lessin that Amazon may hand out its rumored Kindle smartphone to consumers for free. Sources said that the company is shooting for a completely free device, meaning there may not be any financial "contracts" like a two-year wireless contact or a required Amazon Prime subscription commitment.
Yet sources are also quick to be skeptical about Amazon's ability to pull off a free device. The deal would require Amazon to work out financial arrangements with hardware partners. Typically, wireless carriers commit to a large number of devices in return for a bulk discount. The costs of these phones are then subsidized so that customers pay a portion up front -- whether it's $1 or $300 -- and eat the rest of the cost in their wireless plans.
Without this type of setup, Amazon would essentially be paying for each device out of its pocket with no financial return save for media consumption. But what better way to topple the likes of Samsung, Google and Apple than by dishing out free Android-based Kindle phones? Amazon, which makes the bulk of its revenue from ecommerce, would likely see a huge increase in sales of digital media, its Android Appstore, the Kindle store and all through Amazon's shopping portal.
Amazon will reportedly offer its Kindle phone directly to consumers, but sources claim that the company has also approached wireless carriers about offering the device. How would this work when the phone is free? Easy: bundle it with other possible 4G LTE Amazon products. Keep in mind that Amazon makes very little profit off the hardware sales of its current tablets; providing a free phone likely won't push the company into bankruptcy. The real money, it seems, is in the software and ecommerce sales.
"We want to make money when people use our devices, not when they buy our devices," Amazon CEO Jeff Bezos said during the Kindle launch last year.
Back in May, reports surfaced stating that Amazon was actually working on two phones, one of which will be a high-end device possibly using HP's "hologram" tech. The glasses-free 3D smartphone will feature retina-tracking software that will make images seem to float above the smartphone screen like a three-dimensional hologram, complete at every viewing angle. Users will reportedly be able to navigate through content by merely using their eyes -- so the sources claim.
Who wants to bet the lower-end model will be the free phone? All hardware is being developed inside Amazon's Lab126 facility in Cupertino, Calif., sources claim, known as Project A, B, C and D, and collectively as the Alphabet Projects (two phones, music player, set-top box). This is also the same facility where the company was recently testing its own wireless network. The spectrum used in Amazon's testing is supposedly controlled by satellite communications company Globalstar Inc.
Talk of an Amazon Kindle smartphone has been around for nearly two years. Foxconn supposedly had an order for 5 million units back in December 2012, and the device was slated for a mid-2013 release with a pricetag between $100 and $200. But industry sources said in February that the phone was delayed due to design issues.
There's a good chance we'll see these two phones during Amazon's next wave of hardware releases to be revealed within the next several months. Of course, we've said that for years now, so anything is possible at this point.