The Fire phone was a flop. Source: Amazon.
Even after the full-on flop of the Fire Phone, Amazon.com (AMZN +1.25%) CEO Jeff Bezos remains dedicated to increasing his company's relevance in the growing mobile economy. Amazon's most recently reported plan could convince people their next tablet should be a Kindle Fire or even that the next Fire Phone -- should it come along -- is at least worth taking a look at. TechCrunch reports that Amazon is working on a program that allows customers to download premium paid apps and buy in-app add-ons for a single fee. The program is being called Unlocked, according to TechCrunch -- which said it got the skinny via a leaked internal presentation -- and it operates similarly to Amazon's Prime Instant Video service... but, you know, for apps.
Not just for Amazon devices
Unlocked wouldn't be just for Amazon devices. Amazon's app store is available for any Google (GOOGL +0.20%) (GOOG +0.34%) Android device, but users must disable certain security settings to install it. When Amazon tried to sneak its app store into its flagship app, Google delisted it, so users now must install the app store from the web.
Clearly, Google doesn't want the competition. Nor should it. Last year, the company generated approximately $10 billion in gross revenue from its app store, so it's a big market that it's cornered.
But Unlocked may give users the incentive they need to go out of their way and install the Amazon app store. And those would be valuable customers for Google -- customers willing to pay for apps, at least in some form.
Amazon has attempted to draw customers to its app store before by giving away apps that typically charge a price, attracting customers interested in free apps. But Unlocked would attract a different brand of customer. Customers who typically spend a lot on paid apps or in-app purchases would be drawn to the flat fee of Unlocked. That's bad news for Google, because those customers make up the majority of its app store revenue.
Unlocked would reportedly be limited in its selection of apps, and participation would be at the developer's discretion. An app may be free one day and a few bucks the next, and an app that had free in-app purchases may charge for them again in the future. That could lead to some frustrated customers if Amazon doesn't manage its partner relationships.
Kick-starting Fire Phone sales
While Kindle Fire sales continue to do well according to the brief glimpses Amazon provides to us, the Fire Phone was undoubtedly a flop. Amazon was forced to write down $170 million worth of Fire Phone inventory in its third quarter, resulting in a huge earnings miss, and a dent to its stock price.
With tablets, Amazon understands that the device is primarily about media consumption. In that sense, coupling a year of Amazon Prime makes perfect sense. And while users are consuming an increasing amount of video content on their smartphones, they're still largely about apps and games.
About one-third of total time spent on smartphones in the U.S. is with games, and that's exactly what Unlocked reportedly focuses on. While it will have some non-game apps, the headlining partners reportedly include Sega America, and smaller game maker UsTwo. Coupling a free year of Unlocked with a phone would make it instantly more attractive.
Only Amazon
Only Amazon could offer the kind of potentially disruptive deal Unlocked seems to be. Unlocked will reportedly require users to download Amazon's flagship app in order to work, and some nice branding pops up every time a user would have otherwise had to purchase something from the app store. It seems Amazon sees potential for the app store to drive incremental sales on its retail website. That's exactly the strategy behind Prime, as well, which has worked wonderfully, according to management.
Whether Unlocked ever sees the light of day, and whether it can persuade users to switch to Amazon hardware -- or at least install its app store -- remains to be seen. But Amazon appears dead-set on strengthening its position in mobile, which is key if it doesn't want to become just another app.
