Fire Phone: Amazon plays it safe

But there was another way in which the launch was retro - in its echoes of Amazon's unveiling of its original Kindle Fire tablet. Then, the consensus was that the retailer had stumbled by offering me-too hardware, albeit it at an affordable price. But such comments missed the point that Amazon is not a device maker, it is a provider of content and services, and some of the same misconceptions were seen in the disappointment that Amazon had not created an 'iPhone killer'.

As CEO Jeff Bezos was keen to stress this week, the Fire has driven significant additional uptake of Prime, the company's subscription service, which comes with an increasing array of content - and is critical to Amazon for keeping users addicted to its experience and spend-happy. Owners of Fires, like those of Kindle e-readers, typically spend more with Amazon than people using its apps on other gadgets. The question for Amazon now is whether the Fire Phone can pull off the same trick.

Some had expected the company to launch a super-cheap handset to expand uptake and, therefore, purchasing. In fact, the Fire Phone is firmly in the mainstream, price-wise, at $199.99 with contract at AT&T ($650 to $750, depending on memory, without subsidy). Amazon could certainly have been more disruptive with pricing, though that may come in future (its other devices have moved down the price scale fairly rapidly). Bezos has often spoken of how his company has the flexibility to price devices very low, because it is used to operating on very low margins, and because the gadgets are loss leaders to drive revenues from content and goods. However, shareholders are growing restive at those low margins, and may have kicked back against a really cheap handset, as might AT&T, which would risk cannibalizing other key products.

The important element in terms of cost is the bundling of a year's free subscription to Prime (worth $99), as well as unlimited free cloud image storage, which will help hook users on the service, and shows that Amazon understands - and drives - the need to lure users with media rather than hardware price wars (T-Mobile is getting the same message, countering the AT&T exclusive with its own content-driven launch, of unRadio, which offers users a music streaming service that does not count towards their data allowance).

Amazon will benefit if AT&T comes up with similarly creative offers on Fire Phone content deals, though returning to the tactics of exclusives is a weak point of the strategy. Of course an exclusive carrier gives a new device prominence and marketing effort, but Amazon, having entered such a crowded handset space so late, needs to maximize its coverage in its key home market. And so far, there are no indications that it has cajoled its operator partner into doing anything innovative with service pricing - to grab attention, and achieve its primary objective of shifting content, the phone needs to come with some free data, toll-free services or other incentives. In this respect, T-Mobile USA would have been a far better partner, if Amazon really wanted an exclusive.

It also needs to ensure that the Fire Phone appeals to more than just a loyal clique of Amazon aficionados. In this, its challenge is the same as Apple's - creating something with broad appeal, but which retains the core elements of its brand, and is clearly differentiated. The Fire Phone does not need to be a Galaxy 5 in technology terms, but it does in terms of marketing and consumer appeal, otherwise it will not drive sufficient Prime usage to justify its costs.

Here, Amazon's dilemmas are like Google's or Facebook's - how to draw the balance between universal availability of its services on all kinds of platforms, and an optimized experience, under its own control, which can generate user loyalty and higher levels of activity. Facebook and its partners have repeatedly failed to convince users that they need an optimized 'Facebook phone', while Google's Nexus devices - though they boast the latest Android releases and the search giant's idea of the ideal Android user experience - are dwarfed by sales of Samsung Galaxy.

Amazon has done better at establishing a distinct user experience with wide appeal, though this has been in the tablet space - where the big handset makers are less entrenched than in smartphones and the large screen allows for creativity in content delivery. The retailer has invested heavily in achieving a 'Fire experience' for Prime and its other shopping and media services, creating a heavily customized version of Android with its own developer ecosystem and app store. This has been welcome, in creating the only viable alternative interpretation of the Android platform outside China, offering a new choice for consumers and developers - though one under almost Apple-like control.

As Bezos put it: "Fire is the only smartphone to put everything you love about Amazon in the palm of your hand", with access to services like Whispersync, X-Ray and MayDay from an optimized interface.

So will the Fire Phone enhance that user experience and stand out from the crowd for consumers? Its most obvious differentiator is its 3D-like interface, achieved with four cameras and a range of sensors, which create the illusion of 3D on a standard LCD screen. Though 'real 3D' devices from LG and HTC have failed to catch users' imaginations, Amazon says its rendition is richer and more natural.

The other important innovation is Firefly, a scanning and identification feature, which allows users to scan, identify and tag song, films and TV programs - as well as text and numbers on paper - with a single click. Importantly for Amazon, famous for the compulsive ease of its shopping process, Firefly also supports barcode scanning and product recognition - about 70m products can be identified and price-checked, and then bought directly from Amazon (assuming it is the cheapest source).

Otherwise, the handset is similar in its specs to others in its class, such as Moto X. It comes with 32Gbytes or 64Gbytes of memory, with no microSD slot. It has a 4.7-inch display with Corning's Gorilla Glass 3 technology, a rubber body and aluminum buttons. Its 13-megapixel rear-facing camera features image stabilization.

And as always, Amazon stumbles on being so US-centric, at a time when growth in smartphones and mobile content is increasingly driven elsewhere. Outside the US, Prime contains few of the content options available to American customers and is largely a next-day delivery option. Prime Instant Video and the new Prime Music streaming service (similar to Spotify) are US-only, as is Kindle First, which offers early access to upcoming books. Some features are gradually being introduced in the UK and some other markets, but this is no global phenomenon like Galaxy.