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Amazon cuts Fire phone price to $0.99 in the US, opens Germany and UK pre-orders; will ship September 30

Amazon today announced it is cutting the Fire phone's price in the US to $0.99 with a two-year contract.  That's not too bad given that one year of Prime is still included in the package.

The Next Web Emil Protalinski

Context & Ripple Effects

Three months ago Amazon put its first smartphone on sale through AT&T at a premium flagship price; today it has dropped the US price to $0.99 on a two-year contract, a move the New York Times frames as one more marker of dismal market performance. Simultaneously, pre-orders open in Germany and the UK with September 30 shipping — the first step outside the US.

First-order effects

  • US buyers signing two-year contracts get the phone for $0.99 with a year of Prime bundled, converting the handset into a near-free gateway to Amazon's retail subscription.
  • AT&T, the exclusive launch channel, gains a zero-dollar headline offer for the holiday quarter, while German and British buyers can now pre-order ahead of the September 30 ship date.

Second-order effects

  • The cut pressures rival Android flagships sold through carriers in the same mid-market band, since Amazon is willing to absorb the hardware loss to acquire Prime subscribers — a cost structure OEMs pricing for margin cannot match.
  • Bundling a free Prime year makes the subscription, not the device, the unit being sold, pushing carriers and competitors toward their own service bundles to defend contract value.

Third-order effects

  • If the pattern holds, Amazon's hardware business operates as marketing spend rather than a profit line — the same logic behind the $199 Kindle Fire tablet pricing in 2011 — structurally decoupling device price from component cost and forcing the industry to compete on attached services instead.

The trend: Amazon continues pricing devices below cost to convert hardware sales into Prime subscriptions and commerce lock-in, a playbook it established with the Kindle Fire tablet.