STEVE INSKEEP, HOST:
Amazon says it has a deal for you. Amazon has cut the price of its smart phone - The Fire Phone - to 99 cents. This raises at least a couple of questions. Why would they offer a phone for 99 cents and why would they have to? That news from earlier this week turns out to be just the beginning of a story about how the Internet business works and NPR's Aarti Shahani is here to tell us about it. Hi, Aarti.
AARTI SHAHANI, BYLINE: Hi.
INSKEEP: OK. Why 99 cents? The surely can't make money on hardware at 99 cents.
SHAHANI: OK. So first that's 99 cents with a two-year contract. So if you wanted to load up on smartphones without any commitment - no such luck, but the cut is very telling. Amazon, which is a master at selling things, wanted to try its hand at building the device that we use to buy things and so far while they haven't said how many Fire Phone they've sold since launching in late July, they clearly have a lot of inventory left over, but I don't think they've given up hope or anything like that. One thing I found interesting is that the 99 cents is just for the phones with 32 gigabytes of memory. The 64 gig phones will cost you $100. Now it's not because the memory costs so much more, but it could be that Amazon really is hunting for that hard-core, dedicated customer who really loves downloading games and movies and one that's ultimately the customer who will make Fire takeoff.
INSKEEP: I got to tell you, when you hear that they had cut the price to 99 cents, the first question is whether there's some problem, that consumers are not liking this phone.
SHAHANI: Well, the phone has gotten mixed reviews, you know. I talked to some guys at my local AT&T, which is where it's sold and they say people do like those 3-D effects on the screen, which is like the signature of Fire, but it's kind of bling at the end of the day, right? People get smartphones for the awesome apps that you can use and the Fire is very much Amazon's walled garden in terms of the apps, the app ecosystem, like you don't even get to use Google Maps.
INSKEEP: Wait a minute, I think I'm beginning to understand here. You're saying that Amazon with this phone was trying to channel you in different directions to control where you go to spend money and presumably point you at Amazon platforms.
SHAHANI: Yeah, that's exactly right - is that the whole idea for Amazon is, hey, let's get into this smartphone business and let's steer people to our products and let's be able to make revenue off of the, you know, the mobile advertising and whatnot. You know, what they were really hoping was that they had enough offerings to really keep the people buying just within Amazon. And that didn't seem to work out.
INSKEEP: Well, let's contrast that with another product that was launched just this week - the Apple Watch. I guess kind of a computer on my wrist.
SHAHANI: Yes, that's right. Amazon and Apple are actually trying to do similar things here. OK, just bear with me. That is they're trying to take the smartphone and rejigger it to make it an even more intimate experience. But there is a really delicate line for consumers between feeling intimate and then just feeling trapped in your technology. So Jeff Bezos at Amazon figured that because people love shopping at his website so much they're going to love a smartphone that's really a shopping remote control, right? And so far it looks like he really did overshoot there. And now over at Apple, you've got Tim Cook who wants his customers putting Apple all over our bodies, OK. So the smart watch will log how much you run and eat and then you can even take it along to the doctor's office and show, hey, here's my heart rate chart.
INSKEEP: OK, we have Amazon desperately trying to sell the super cheap phone. We have the Apple Watch, of course the iPhone 6 has come out. What else is out there that's moving the market?
SHAHANI: Well, there's a lot moving the market and actually the real gorilla in the room is Android. Android is by far the most popular operating system in the entire world. And Google has gone through great pains to build versions of Android that are using less and less bandwidth. So, you know, if you're in another part of the world with worse connectivity, you can still be connected and use your various apps. And so while we're talking about these blingy new products this week, it could be that the real money in a global market is a more blue-collar experience.
INSKEEP: NPR's Aarti Shahani in San Francisco. Thanks.
SHAHANI: Thank you.
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