Except it isn't being sold at a low price, and doesn't really offer anything valuable to the customer that differentiates it from the competition. The implicit deal was always the product is sold at cost so they can encourage sales on the store, why would anyone pay full price for this?

Fair enough, but I suspect the profit margins on this phone are pretty slim, given the hardware features. I think Bezos figured the high end hardware was necessary to initially break into the market.

Agreed. If they initially brand the Fire phone as a high-end device it will seem more valuable when they ruthlessly cut its price=).

It's likely subsidized by the AT&T exclusive. I believe it's $200/month plus some contract. Which means they may be getting kickbacks totaling more than $200/device which would improve their margins. Or more interestingly, mean the device can be higher end and impress people more while at least not being a loss for Amazon. It's basically a store interface, leading to increased sales. Firefly is like Shazam for products, people will likely buy way more from Amazon.

What trend, the trend where Amazon is an also ran in tablets, set top boxes and soon to be phones? Apple's hobby TV product which hasn't been updated in 18 months made about the same profits last quarter as Amazon's entire business. Let that statement sink in.

Revenue =/= profits. Amazon is a middleman and are only successful at generating revenue growth because they don't make profits.

Where do you see a figure for Apple TV profits? I haven't seen where that is broken out.

I wonder how this relates to IBM of old which had a business model that amounted to "Sell at high price, high tie-in revenue." It didn't work out so well for them (at least for their PC business), turned out that people didn't really want to be "tied"-in.

Given the PC business was already commoditizing (because of IBM's insane reliance on Microsoft without the proper contract to prevent what happened), the high price sale couldn't compete as well against lower priced products.

Plus most of their sales were B2B where brand loyalty means little for commodity products, esp. given the high tie-in strategy.

I don't think this perspective is correct regarding to the current different business models these companies have.

Apple: We sell an experience of software and hardware. Google: We sell ads, based on data we gather from our users. Amazon: We sell commodities\services as close as possible to the marginal utility, so we're very competitive.

Altough each of these tech giants are competing, each has quite a different strategy.

As for the Fire phone, I think that Amazon realized that they could deliver an excellent shopping experience from the mobile phone. This would enable massive future growth: Think about going home in the train and buying groceries instead of driving to your nearest Wallmart.

I don't get this assumption. All three same basically the same content at presumably roughly the same margins.

no, Appple margins- HUGE, Amazon margins - small (like a few hundred million on 50 billion top line). Google is somewhere in between. On content, they deliver content very differently. delivery is important