TIME Smartphones

4 Reasons Amazon’s Fire Phone Was a Flop

German Launch For Amazon's Fire Smartphone
A man holds the new Fire smartphone by Amazon.com Inc. during demonstration at a a news conference in Berlin, Germany, on Monday, Sept. 8, 2014. Bloomberg—Bloomberg via Getty Images

Amazon still has $83 million worth of unsold units

Amazon’s ongoing expansion into more and more product categories has finally hit a big speed bump. The Fire Phone, Amazon’s recently launched smartphone, was supposed to compete with high-end devices like Apple’s iPhone and the Samsung Galaxy. But consumers apparently didn’t bite—Amazon was forced to take a $170 million writedown charge on costs related to the device, it was revealed Thursday. Meanwhile, the company reportedly has $83 million worth of unsold Fire Phones still in its inventory.

While CEO Jeff Bezos is likely surprised that the Fire Phone hasn’t flown off Amazon’s virtual shelves, the device’s lack of appeal was obvious to many outside observers. Here are four reasons Amazon’s Fire Phone was doomed from the start:

Too Expensive

Amazon has a history of undercutting competitors on everything from tablets to balsamic vinegar. So it came as somewhat of a surprise when the Fire Phone launched at $199 with a two-year wireless contract, essentially the same price as the iPhone and Samsung Galaxy. The high price didn’t help incentivize iPhone and Galaxy owners to abandon their devices, which is what Amazon needed to happen for the Fire Phone to gain quick traction. The company saw the error of its ways relatively quickly and dropped the phone’s price to 99 cents in September, but that hasn’t been enough to turn things around.

Small App Store

Though Amazon’s devices run on Android, they use a proprietary app store tailor-made for the company’s phones and tablets. That means developers have to make different versions of their apps specifically for the Fire Phone and Kindle Fire, and many haven’t bothered. Amazon’s app store has about 240,000 apps, compared to more than 1 million in the Google Play store. Most notably, Amazon’s store lacks Google’s flagship apps, so Fire Phone owners have no easy access to Gmail, YouTube or Google Maps. Other popular services, like Dropbox, are also absent. Users can sideload Android apps onto the Fire Phone, but it’s a more cumbersome process that might be beyond the technical prowess of some Amazon fans who are used to the simplicity of devices like the Kindle e-reader.

Late to Market

The Fire Phone was a classic case of “too little, too late.” Apple is on its eighth generation of iPhones, and Android devices have been around nearly as long. Smartphones now account for 72 percent of the overall mobile market in the U.S., according to Comscore. Amazon would probably have the most luck convincing first-time smartphone buyers who have yet to develop a device preference to pick up a Fire Phone, but there simply aren’t many of those people left.

Features of Limited Interest

Many of the Fire Phone’s most innovative features, like the ability to scan 100 million real-world objects with the press of a button, are really aimed at getting customers to buy more things on Amazon. Making such features the main selling point of the device immediately means its appeal will be limited to only heavy Amazon users. Other new features, like the 3D display, were generally met with a collective yawn. The iPhone 6’s most prominent new feature, meanwhile — its big screen — is a more obvious upgrade, and its own commerce-focused perk, Apple Pay, works at plenty of places outside Apple’s ecosystem.

Overall, Amazon’s ambitious device simply doesn’t have a defining quality that would compel the average consumer to run out and buy it. We’ve all made it this far in life with perfectly suitable smartphones, and there already myriad ways to buy stuff on Amazon. The Fire Phone is solving problems that nobody had in the first place.

TIME Companies

Ad-Free Social Network Ello Gets $5.5 Million in Funding

US-IT-INTERNET-MEDIA-ELLO
The Ello website is seen on the monitor screen September 27, 2014 in Washington D.C. Paul J. Richards—AFP/Getty Images

Company promises it will never sell ads or user data

The burgeoning social network Ello has raised $5.5 million in a new round of venture funding, it was revealed Thursday. The buzzy startup gained widespread attention in September thanks to its manifesto decrying social media companies’ habit of gathering and monetizing user data.

“Advertisers buy your data so they can show you more ads. You are the product that’s bought and sold.” the manifesto reads. “We believe a social network can be a tool for empowerment. Not a tool to deceive, coerce and manipulate — but a place to connect, create and celebrate life.”

Ello is putting some legal muscle behind its lofty rhetoric by reincorporating as a public benefit corporation in Delaware. The company will vow in its new legal charter that it will never sell user data or advertising, according to The New York Times. The company plans to make money by charging users for extra, as-yet-unspecified features.

Though Ello has been around since summer, the site exploded in popularity last month after Facebook began kicking drag queens off its site because they were not using their legal names, leading some of those users to relocate to Ello. The small social network leapt from 90 users in early August to more than 1 million today, according to the Times. Facebook has since apologized for how its real name policy affected the LGBT community and others.

The funding round was led by Foundry Group, based in Boulder, Colo.

[Re/code]

 

TIME Social Media

Twitter Wants to Dominate Apps By Winning Over Developers

Twitter Inc. Headquarters As Company Raises $1.8 Billion After Boosting First Debt Sale
The Twitter Inc. logo is seen on coffee mugs inside the company's headquarters in San Francisco, California, U.S., on Friday, Sept. 19, 2014. Bloomberg—Bloomberg via Getty Images

Social network wants to expand its reach beyond tweets

Twitter is trying to make itself an essential part of the app ecosystem with a new suite of tools aimed at mobile developers. Those tools, announced Wednesday and bundled together in a free service called Fabric, put Twitter in more direct competition with Google and Facebook for control of the mobile future.

Fabric is comprised of a suite of individual tools that together help developers deal with many of the issues they face getting their apps up and running. Crashlytics, a company Twitter bought in 2013, will help developers analyze crash rates for their apps and improve stability. MoPub, another recent Twitter acquisition, is an ad exchange that allows developers to easily serve ads in their apps that are bid on in real-time auctions. The third leg of Fabric, called Twitter Sign In, will let people sign into different apps using their Twitter login credentials rather than a username and password specifically for that app. Similarly, a new service called Digits will let people sign into apps using their cellphone number instead of a username and password.

Outside of Digits, Twitter had offered some form of these services before, but they hadn’t been wrapped up in one simple-to-use interface. Announced at the company’s first-ever mobile developer conference, Fabric is something of an olive branch Twitter is extending to the development community after the social network tightened access to its API a few years ago. Whether app makers will play nice with Twitter now remains to be seen.

TIME Reviews

Apple’s New iPads Are Great, But Not Essential

Apple Unveils New iPad Models
The new iPad Air 2 (R) and iPad Mini 3 are displayed during an Apple special event on October 16, 2014 in Cupertino, California. Apple unveiled the new iPad Air 2 and iPad Mini 3 tablets and the iMac with 5K retina display. The Asahi Shimbun—2014 The Asahi Shimbun

You may be better off seeking last year's cheaper models

Apple’s latest iPads, the iPad Air 2 and the iPad Mini 3, are being released to relatively muted fanfare compared to the excitement that surrounded the launch of the company’s latest iPhones. It makes sense—while the latest iPhones sported larger screens, much-improved cameras and the ability to be used as mobile wallets in stores, the improvements to the iPad line are subtle by comparison.

The new iPads are great, reviewers say, but they may not warrant running out for an immediate upgrade. Here’s a rundown:

Over at The Verge, Nilay Patel praises the iPad Air 2’s unprecedented thinness (6.1 millimeters), improved A8X processor, TouchID fingerprint scanner and battery life. However, at $499 for the cheapest model with 16 GB of storage, he says the product doesn’t differentiate itself enough from the slightly smaller iPhone 6 Plus or a full-fledged Macbook:

iOS 8 and OS X Yosemite are designed to make the transition from iPhone to Mac easier than ever with features like Handoff and Continuity; there’s hardly any reason to take a pitstop at the iPad along the way . . . For better or worse, Apple’s allowed the iPad to become the giant iPhone its critics have always insisted that it is, and in a world with giant iPhones that’s a tough spot to be in.


The iPad Air 2 is “pretty close to perfection,” according to CNET, but it also “doesn’t do anything startling or new.” As Scott Stein explains:

The iPad Air 2 is undoubtedly better than any other current iPad, but its advantages might matter less than last year’s dramatically-redesigned iPad Air: screen quality, size, and battery life are close enough, effectively, to feel the same. Processor power and camera quality — and Touch ID — are welcome additions, but not needle-movers for the typical iPad user. Year-old iPads have never seemed like better bets.

The original iPad Air is now retailing for $399 for its cheapest model. Critics say that may be a better choice for iPad newcomers or those with even older tablets looking for an upgrade.

Apple’s new pint-sized tablet, the iPad Mini 3, probably isn’t worth its price, according to the New York Times’ Farhad Manjoo. It doesn’t sport the super-fast processor in the iPad Air 2 and it has the same weight and dimensions as its predecessor, the iPad Mini 2. The newly-added Touch ID is the main differentiating factor, along with a new gold model, but Manjoo says that’s not enough. “Unless you’re going to be doing a lot of Apple Pay shopping or you’re gaga for gold, it’s best to save the $100 and go with the Mini 2,” he writes.

The final verdict: Apple’s latest products are well-designed and probably the most advanced in their respective markets, but they still don’t quite warrant their high price tags, especially if you’re looking for more storage than the basic models provide.

 

TIME Media

CNN and Other Turner Stations Pulled From Dish Network

It's the latest sign that the pay-TV business model is under strain

CNN, Cartoon Network and other stations owned by Turner Broadcasting were pulled from the Dish Network lineup late Monday after negotiations between the two companies stalled. The incident is the latest flare-up in the pay-TV industry as television distributors balk at paying increasingly high programming costs to networks.

“In the past year, DISH has successfully renewed agreements with many large content providers,” Warren Schlichting, DISH’s senior vice president of programming, said in a statement. “As a result, we are confident that we have offered a deal to Turner that reflects an appropriate value for our customers.”

Turner fired back by claiming that Dish was the one who had led to the blackout. “Turner has worked diligently for months to come to a fair agreement including multiple extensions and compromises, and it’s unfortunate that Dish is once again operating in a disruptive manner that takes away networks and programming from their customers,” the company, a subsidiary of Time Warner, said in a statement.

Dish Network has about 14 million pay-TV subscribers, making it one of the largest providers in the U.S.

Spats between pay-TV operators and network owners have gotten increasingly contentious as operators have begun to shed video subscribers in recent years. A blackout of CBS on Time Warner Cable last summer lasted about a month, and the cable operator Suddenlink dropped Viacom channels indefinitely at the start of October. In their statements, both Dish and Turner indicated that they are trying to come to an agreement soon.

With HBO and CBS having just announced that they will offer their channels directly to consumers who don’t have cable, negotiations over programming costs may grow even more heated in the future. The growing discord in the pay-TV industry indicates that massive, expensive bundle of one-hundred-plus channels that we’ve all grown accustomed to may not be long for this world.

TIME technology

Why Apple Pay May Be the Company’s Most Challenging Move Yet

For Apple Pay to work, Apple needs to get customers, retailers and banks all in lockstep

Our smartphones have already become our de facto camera, music player, navigational device and personal assistant. Now Silicon Valley wants to make them our wallet, too.

Several tech firms have spent the last few years trying to convince consumers their phone is a more convenient payment method than cash or plastic. Most shoppers have balked. But on Monday, Apple is entering the fray, and experts say that could be a turning point for the long-hyped mobile payments industry.

Apple’s service, dubbed Apple Pay, allows customers to buy goods in physical stores with a simple tap of their iPhone 6, iPhone 6 Plus or Apple Watch smartwatch, when that device hits shelves in early 2015. Apple Pay users load their credit card information onto the phone, then press their device’s Touch ID fingerprint scanner in the checkout line to authenticate the purchase. The process is faster than using a debit card — and more secure. Apple generates a unique ID number for each transaction, meaning users’ credit card data numbers are not shared with merchants.

Apple Pay is launching just as the smartphone is becoming a central point of commerce for the average shopper. Consumers spent $110 billion via their mobile devices last year, according to research firm Euromonitor, and they used their phones plenty more to research products before buying them in stores. Meanwhile, person-to-person payment apps like Venmo have made people comfortable loading their phones with dollars to make simple transactions.

“All of that is really conditioning consumers to trust their phones when it comes to payments,” says Michelle Evans, a senior consumer finance analyst at Euromonitor.

But consumers are still reluctant to give up their credit cards. Mobile payments generated $4.9 billion in sales in 2014, a paltry figure compared to the year’s $4.8 trillion in card transactions, according to Euromonitor. Google’s own mobile payments service, Google Wallet, offers much of Apple Pay’s functionality but hasn’t seen widespread adoption. Startup Square abandoned its much-hyped mobile wallet platform earlier this year, instead pivoting to an order-ahead service like Seamless. PayPal, which is spinning off from eBay in 2015, has also struggled find a mobile formula that works in stores.

“It’s definitely starting to catch on, but I don’t think anybody has quite nailed the overarching reason to pull out your phone to pay,” says Anuj Nayar, PayPal’s senior director of global initiatives.

The transition to mobile payments is a challenging one because it requires buy-in from so many different players. Consumers have to be convinced it’s worth their time to learn a new buying behavior. Retailers have to pay for new equipment so their point-of-sale systems can accept payment from phones and smartwatches. Banks and credit card issuers also have to buy in. “It’s a lot of people to get in lockstep,” says Evans.

Apple does have a few key advantages over its competitors. The company has a knack for convincing people to change their digital lifestyles, whether by downloading MP3s, surfing the web on a phone or using a large tablet to watch videos. And thanks to the iTunes Store, Apple has more than 500 million credit cards already on file. Those customers will be able to seamlessly start using the same accounts they use to buy apps and music to buy goods in the real world when they first boot up Apple Pay. “We’ve never had this large of a base in a starting country” for a mobile payment system, says Matt Dill, Visa’s senior vice president for Innovation & Strategic Partnerships, Commerce and Network Payments.

However, analysts say convincing shoppers to give up credit cards, which are already fairly painless to use, will take more than just offering convenience. The most successful mobile payments platform to date is the Starbucks app, which rewards customers who pay via their phones with free drinks and other perks. Today, Starbucks processes about 15% of all its transactions on the app, or about 6 million per week.

“The customers really feel It’s not just about payments,” says Ben Straley, Starbucks’ vice president for digital products. “It’s also about being rewarded for their loyalty.”

But even if Apple can convince consumers to take their money mobile, some merchants aren’t playing ball. Wal-Mart, America’s largest retailer, won’t support Apple Pay at launch. Instead, it and other big-box stores like Best Buy are developing a competing mobile payments platform called CurrentC, set to launch sometime next year. Such merchants would have to be the driving force behind any effective loyalty rewards program that convinced shoppers to abandon their credit cards.

With so many competitors offering mobile payment options, analysts expect the segment will finally take off soon. Euromonitor projects in-store purchases via phone will rise to $74 billion by 2019 — though that’s still a far cry from the trillions in card purchases we see today. Mobile devices are already becoming a common tool for buying things in the virtual world. It could very well happen in the real world, too. “It’s just shopping, whether you’re buying it in a store or buying it online,” says PayPal’s Nayar. “The lines between what that looks like have started to disappear.”

Read next: Apple Pay Starts Monday for iPhone 6 Users

TIME Media

The Cable-TV Bundle Is Finally Starting to Unravel

The logo of Home Box Office Inc. (HBO) is seen on the exhibit floor during the National Cable and Telecommunications Association (NCTA) Cable Show in Washington on June 11, 2013.
The logo of Home Box Office Inc. (HBO) is seen on the exhibit floor during the National Cable and Telecommunications Association (NCTA) Cable Show in Washington on June 11, 2013. Bloomberg/Getty Images

It's not a matter of if more channels will be sold a la carte, but when

It’s been a long time coming. For years, television viewers have griped about having to pay for a massive bundle of channels that they barely watch. In 2013, the average American TV household received 189 channels, but tuned into just 17 of them. A careful, decades-long dance between pay-TV providers and networks has ensured that, for the most part, you need a cable or satellite subscription to watch live TV.

Two back-to-back announcements this week could threaten this extremely lucrative business model. HBO, which has TV shows so valuable that people have actually been begging to pay for them, announced Wednesday it’s launching an online streaming service in 2015 that doesn’t require a cable subscription. If it’s like HBO Go, that means users will be able to stream all the network’s hit shows as they air on TV. CBS made a similar move Thursday by announcing CBS All Access, a new platform that will allow customers to access much of the channel’s past and present content online for $5.99 per month, including live broadcasts in 14 markets.

By making these channels available for purchase individually, CBS and HBO are embracing the “a la carte” TV model, in which viewers would be able to select the individual channels they want to pay for and ignore the rest. It’s a concept that makes intuitive sense in a world where songs, movies, books and news can be consumed individually, on the go and at little cost.

But the model poses a huge threat to cable operators, network owners and even subscribers. If every network did what CBS and HBO are doing, cable and satellite operators would have the core part of their businesses wiped out. Network owners, meanwhile, would have to convince millions of individual customers to buy their channels instead of negotiating with just a few large pay-TV companies. Greater price transparency would hurt most channels—just ask Netflix, which said a $1 price increase caused it to miss its subscriber growth projections in the most recent quarter. While a prestige channel like HBO could command a high price on its own, more niche channels would probably find it tough to turn a profit individually. Many of them would likely fold, according to one study, and the quality and quantity of content of available on TV might actually diminish.

For these reasons, we’re still not close to a world where consumers can buy any channels they want in any combination. The owners of basic cable channels in particular, which are widely distributed and generate revenue even from subscribers who never watch them, aren’t keen to disrupt the current model. And anything involving high-profile sports is likely to remain under tight lock and key—CBS’s streaming service, for instance, won’t play NFL games.

“It would be absolutely detrimental to their current business model,” Erik Brannon, an analyst at IHS Screen Digest, says of the full unbundling of cable channels. “I just don’t see them being willing to jeopardize future affiliate fee growth for a few bucks here and there on the Internet.”

Still, operators and networks are finally being forced to reckon with shifting consumer habits. The number of U.S. pay-TV subscribers declined for the first time ever in 2013. Meanwhile, the number of households that watch TV content solely through a broadband connection has doubled in recent years, according to Nielsen. These are mostly young adult viewers who will define the way TV content is consumed in the future.

“There’s a shift that’s going on in consumer behavior in viewing video,” says Brian Blau, an analyst at Gartner. “Consumers are slowly but surely moving away from watching linear television on cable. They’re starting to watch these TV shows and movies more on their mobile devices.”

In the near term, analysts say the networks most likely to mimic the HBO or CBS model are their most direct competitors. It’s easy to imagine Showtime offering an HBO Go-like service, Brannon says, or ABC live-streaming its programming for a monthly fee. And while the cable bundle isn’t going anywhere, it may go on a much-needed diet. A growing number of consumers are picking smaller cable packages, indicating they’re tired of paying for hundreds of channels they don’t watch. And new entrants in the pay-TV space like Dish Network are building their business models around offering smaller, cheaper bundles of channels.

What HBO and CBS are doing suggests the future of TV will be messier and more confusing and perhaps less entertaining than the so-called “golden era” we live in now. But consumers will have more choice of what they watch and how much they pay for it. “It’s not a matter of if” more channels will be sold individually, says Brannon, “but when, and for how much.”

TIME Earnings

Netflix Had a Pretty Awful Day

Netflix's logo
Netflix

Online streaming service revealed Wednesday it had missed growth targets, as HBO announces a rival streaming-only service

Correction appended Wednesday, Oct. 15

Netflix stock took a nosedive in after-hours trading thanks to a confluence of bad news for the company on Wednesday.

The streaming service missed its subscriber growth forecasts for the quarter and is one of the companies most threatened by HBO’s surprise announcement Wednesday that it will begin offering its content in a stand-alone streaming service in 2015. Netflix shares fell more than 25% in after-hours trading, erasing more than $7 billion in company value.

Netflix added 3.02 million subscribers globally during the third quarter, well off the 3.69 million the company had projected. In the U.S., the company blamed the stalled growth on a $1 price hike that went into effect in May. “Slightly higher prices result in slightly less growth, other things being equal, and this is manifested more clearly in higher adoption markets such as the U.S.,” the company said in a letter to shareholders. Netflix also missed the mark in international markets, though it rolled out in six new European countries in September.

The streaming service’s financial results were more positive. Netflix pulled in $1.4 billion in revenue, meeting analysts’ expectations. Earnings per share were 96 cents, beating projections of 93 cents. Overall Netflix generated $59 million in profit.

But the looming specter of a stand-alone HBO that consumers will be able to buy without subscribing to cable may be a greater threat to Netflix than slowing growth. The company did not seem overly concerned, however, about having to convince customers that House of Cards is more worthy of their money than Game of Thrones.

“The competition will drive us both to be better,” Netflix said in its letter. “It was inevitable and sensible that they would eventually offer their service as a standalone application. Many people will subscribe to both Netflix and HBO since we have different shows, so we think it is likely we both prosper as consumers move to Internet TV.”

Correction: The original version of this story misstated Netflix’s total revenue in the third quarter. It was $1.4 billion.

Read next: HBO Will Finally Start Selling Web-Only Subscriptions Next Year

TIME Regulation

More Than 350,000 Customers Have Asked AT&T for a Refund After Bogus Charges

New York City Exteriors And Landmarks
A general view of the exterior of the AT&T store in Times Sqaure on February 21, 2013 in New York City. Ben Hider—Getty Images

Here's how to request yours

Hundreds of thousands of AT&T customers have requested refunds for bogus cell phone charges since the telco reached a settlement with the Federal Trade Commission last week to reimburse consumers, an FTC official told TIME Wednesday. In total, 359,000 individuals have sent in claims to the FTC seeking refunds for unauthorized charges that appeared on their cell phone bills in a practice known as “cramming.” Through cramming, third parties are able to issue unwanted, recurring charges for things like love tips and horoscopes to cell phone users.

Jessica Rich, the director of the FTC’s bureau of consumer protection, said the response from consumers was one of the largest the agency has ever seen. The only case with a larger number of claims that she could recall was a 2012 settlement with Skechers over deceptive marketing for one of its shoe lines, which garnered close to half a million consumer complaints. “We expect this to be a lot higher,” Rich said.

In total, AT&T has agreed to pay $80 million in refunds to customers for cramming charges. The telco giant will also pay $20 million in penalties and fees to the 50 states and Washington, D.C., and a $5 million penalty to the FTC. At the time of the settlement, an AT&T spokesman noted that the company was the first in the telco industry to stop charging customers for premium SMS messages in late 2013. The FTC is currently suing T-Mobile over the same issue.

It’s not guaranteed that all the people who have issued claims will actually receive refunds. An independent claims administrator will review the refund requests to determine if they are valid. “I’m expecting that most of the claims are going to be valid, but if they’re not valid, there will be a way to determine that,” Rich said.

Customers who think they were a victim of cramming can file to claim a refund until May 1, 2015.

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