Two months after it launched the Fire Phone, Amazon is dropping the price from $199 on contract, to only $0.99, also on contract. The move comes after 3rd party reports that the Fire Phone has been selling tens of thousands of units, rather than millions, which is probably what Amazon was expecting.
"Fire is now 99 cents with a two-year contract, plus customers get one full year of Prime included," said Ian Freed, Vice President, Amazon Devices. "With access to all of the Prime content, Mayday, 32GB of memory and free unlimited cloud storage for photos, plus the exclusive Dynamic Perspective and Firefly features, Fire is another example of the value Amazon delivers to customers."
Unfortunately, even at this price, it's probably too late to change the market's perception about this phone. If Amazon wanted to offer the device for a low price, it should have done so from day one, when it had the opportunity to make a big splash; now, it's going to be much harder to convince potential buyers to reconsider. Amazon may not get the opportunity to do that again until a potential Fire Phone 2 launch.
Amazon would have likely had more luck with the Fire Phone if it had used the same strategy that has worked so well for the company in the past with devices such as the Kindle Fire: selling low-price, but high-value, unlocked devices. Then Amazon may have also had the ability to sell the phone on multiple networks, rather than be tied to a single one.
Amazon chose to go with an on-contract deal instead and use AT&T as an exclusive network for the Fire Phone, limiting its potential buyers through both network reach and a high upfront cost of $200 -- which is the same cost as other flagship phones. Yet the Fire Phone doesn't offer anything particularly exciting or useful than other high-end handsets beyond the four cameras that enable the "Dynamic Perspective" (Amazon's parallax-like effect for 3D objects and wallpapers), and even that could be considered a gimmick. Amazon also has a much more limited ecosystem of Android apps, which can reduce the Fire Phone's sales potential, too.
Hopefully, Amazon will learn a few lessons from this experiment, and will have a much better planned launch for its next-generation Fire Phone 2 (if there will be one next year).