Free smartphones from Amazon coming soon!

From Jessica Lessin

Which technology giant will be the first to offer a free smartphone? Amazon.com Inc. is making a play. In a previously unreported move, the online retailer and Kindle maker is considering introducing its long-planned smartphone for free to consumers, according to people familiar with Amazon’s effort. There are many unanswered questions about the plan and what strings will be attached for customers. One of them is whether Amazon would require its smartphone owners to pay for services such as Amazon Prime, the company’s loyalty program. But the people familiar with the matter said that Amazon wants the device to be free whether or not people sign up for a new wireless plan at the same time. (Wireless carriers typically discount the price of devices if customers sign up for a one- or two-year wireless contract.) One person familiar with the effort said the company has talked to wireless carriers about offering its phones, though it is expected to offer them directly to consumers through its website. A launch date also is unclear. The pricing strategy is a big departure from the strategies of incumbents like Apple Inc. and Samsung Electronics Co., whose new flagship phones retail at around $200 with wireless contracts in the U.S. Those companies also offer some older high-end models for free or for just $1, with contracts. The free strategy isn’t set in stone and depends on several factors, including Amazon’s ability to work out financial arrangements with hardware partners, said one of the people who is familiar with Amazon’s smartphone effort. This person and others expressed skepticism about Amazon’s ability to pull off a free device. Still, Amazon’s pricing ambition is the clearest indication of its phone playbook: undercut rivals and grab meaningful market share. (An Amazon spokesman declined to comment.) Apple’s Nightmare It is also shows that Apple’s worst nightmare may be coming true: prices could fall not just for cheap phones in developing markets but higher-end ones too. Indeed, for years, Apple and Samsung have been packing their flagship phones with more bells and whistles in order to justify premium prices. And they have been pretty successful. In the past five years, the average price a consumer paid for smartphone that is not subsidized by a wireless carrier dropped just 20% to $343 from $430, according to IDC. But the game is changing. New smartphone entrants Amazon and Google generate revenue primarily through e-commerce sales and online advertising, respectively READ MORE