Fire Phone one year later: Why Amazon's smartphone flamed out

There are times when being the first person with a new gadget will elicit cheers and envy -- like outside New York's Fifth Avenue Apple Store, surrounded by applauding salespeople, curious fans and gawking media.
Then there's buying the Amazon Fire Phone.

Marlena Solomon learned first-hand the hazards of being an early adopter when she jumped at the chance to buy Amazon's first-ever smartphone a year ago.
Her excitement quickly turned to frustration after she realized the phone didn't have many of her favorite apps -- including Google Maps and Starbucks -- and she was annoyed at how difficult it was to import her Apple iTunes library. On top of that, instead of marveling at her new gizmo, some people asked, "Why did you buy that?" Three months after she got the device, it went back in its original box and was tucked away at Solomon's home. She went right back to owning an Apple iPhone.
"It's the one time being a first adopter really kicked me in the butt," said Solomon, 45, a marketing specialist for an automotive lubricants company who lives northwest of Houston. "As soon as I put it back in the box and charged up my iPhone, I didn't think about it again."

Marlena Solomon shows off her Fire Phone, which she used for just three months. Courtesy of Marlena Solomon

Solomon's experience is just one of the many negative reactions to the online retailer's smartphone, which first hit the market a year ago this weekend. It became an uncharacteristic and high-profile failure for a top tech company known for thrilling customers and boldly expanding into new markets. The Fire Phone also serves as a warning to other would-be phone makers as proof that the smartphone market is incredibly difficult to break into, and offers lessons on what sort of pitfalls to avoid.
"I think the silver lining, if there is one," Baird analyst Colin Sebastian said, "is that Amazon learned a lot about mobile and that everything they do won't be a success."
It's a far cry from a year ago, when CEO Jeff Bezos took the stage at an event, held in Amazon's hometown of Seattle, that was electrified by the excitement of the super fans the company had invited to sit alongside industry and media folks.
"Can we build a better phone for our most engaged customers? Can we build a phone for Amazon Prime members?" Bezos asked before taking a dramatic pause. "Well, I'm excited to tell you that the answer is yes."
Amazon declined to make any executive available for this story.
It didn't take long for reality to take hold and for the Fire Phone to flame out. Within two months, AT&T dropped the price from $200 to just 99 cents with a two-year contract. (It can be had for $179 without a contract.) Three months after the launch, Amazon took a $170 million charge to wipe out the lost value of its unsold Fire Phones, adding that it still had $83 million in inventory at the end of that period.
But the Fire Phone wasn't a complete bust. For anyone looking to get into the smartphone business, the device offers a few critical lessons.

It's all about price

There are a handful of reasons the Fire Phone flopped, but its starting price proved a major snag and may have turned off many potential customers.
Consumers and analysts were expecting Amazon to follow its familiar playbook of offering a cheap, but good-enough product that could undercut other devices already on the market. That strategy proved a success for Amazon in tablets, as its inexpensive plastic-and-glass Fire devices (originally the Kindle Fire) offered a cheap alternative to Apple's iPad and helped Amazon become a major player in that market four years ago.