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Amazon Enters the Smartphone Death Match, and Data Could Give It an Edge


Amazon is widely expected to unveil a smartphone, potentially with 3D capabilities.


The stars are aligning for an (NASDAQ:AMZN) smartphone, even if they're doing so in an ugly universe.

And make no mistake about it -- the smartphone universe is ugly, even if it did grow 28.6% in Q1, per IDC's estimates.

The glut of quality phones has taken a toll on even the two kings Apple (NASDAQ:AAPL) and Samsung (OTCMKTS:SSNLF), while former powerhouses Motorola, HTC (OTCMKTS:HTCXF), and BlackBerry (NASDAQ:BBRY) continue to struggle mightily.

Yesterday, Amazon sent out invites for a special June 18 launch event, including the following trailer, which features sensible-looking folks awkwardly admiring a mystery gadget.

In April, the Wall Street Journal reported that Amazon was planning a smartphone with a unique display that could show 3D images without the need for glasses and the ability to track user movements.

The video above supports this case: Five seconds into it, a woman says, "It moved with me," and the rest of the cast is shown moving along with what appears to be some kind of device.

And of course, Amazon's banner ad features what looks like a smartphone:

I also grabbed a still from the video (at the 0:14 mark), which, based on the way our plaid-shirted friend is using Amazon's mystery gadget, implies a smartphone is coming:

Of Course, It Is Logical

Since launching the Kindle e-book reader in 2007, Amazon has expanded its hardware offerings to tablets with the Kindle Fire line and streaming media boxes with the Fire TV.

A smartphone is the logical next step -- especially since both e-readers and tablets are seeing weak sales trends, and since Amazon's already got an Android app ecosystem.

As I explained above, the smartphone market is very rough, but Amazon has never looked to actually make money on devices; it's goal is to create new channels to sell digital content.

It may just want to break even.

The Data Angle

On April 25, Boy Genius Report cited sources indicating that Amazon's smartphone strategy includes a wireless plan called Prime Data that would carry a low price and/or some type of sponsored data for Amazon's Prime digital media offerings.

The sponsored-data angle is interesting since most wireless plans have data-usage limits that make using streaming media apps like Netflix (NASDAQ:NFLX) very expensive.

If Amazon foots the data bill for its streaming apps (including its rumored new music service), and the data plans themselves are reasonably priced, then we're potentially looking at an attractive package -- not just another twist on an Android smartphone.

More Questions Than Answers

Since we don't even know what we're looking at, it's hard to make serious assessments about its market potential.

What does an Amazon Prime subscriber get out of an Amazon smartphone vs. an Apple iPhone or Samsung Galaxy S model?

How will selling and service work? Will these be sold only on Amazon? Will Amazon piggyback a carrier like AT&T (NYSE:T) for exclusive voice/data plans? Or will its phones just end up on normal store shelves with the competition?

And finally, will 3D or motion controls make a difference? After all, consumers never really embraced 3D televisions or cameras. And the motion-control boom in video games may have already peaked, given that Microsoft (NASDAQ:MSFT) just pulled its Kinect from standard-equipment status with the Xbox One console.

But let's stay tuned. Amazon's as big a disruptive force as any company out there, and unique data plans could give it an edge in a market that seemingly has none.

Twitter: @MichaelComeau

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