Amazon should partner with RIM to build a smartphone

Posted on March 31, 2012

Successful mobile phone ecosystems in the future are going to feature a whole range of devices to access data and consume content. Amazon has a strong presence with its Kindle range of devices, and arguably is strong on the web, but has little or no direct control over smartphones.

It has borrowed space on smartphones today with its kindle book reader for iOS and Android, and has created an Android app market. But it doesn’t control the underlying platforms so is susceptible to competitive pressures from Google or Apple.

Amazon’s Platform Strategy

With the introduction of the Kindle fire for $199 it’s clear that Amazon is using the razor-blade model to make device hardware cheap and wireless transport of their content cheap. Amazon’s goal with hardware is to make electronic consumption of their content cheap and easy for the consumer.

So why do they need a phone? As ecosystems become more tied together across devices, people may choose to move away from the Kindle ecosystem if they don’t have a smartphone available to them.

Why would RIM be a good partner?

RIM’s current cash cows are markets in the far east where devices are prized because they are low cost to buy and low cost to run. An Amazon smartphone device should be both low cost to buy an low cost to run, hence RIM would be able to bring to Amazon the expertise they need to build such a device.

Why not Android though? Android is an operating system, so Amazon would have to build the hardware and software expertise to create a competent telephony device. This is second nature to RIM, who also has a great deal of expertise in data compression which would reduce Amazon’s content distribution costs.

The other argument in favor of Android would be that Amazon has already invested in their app store for other Android devices. This investment would not be in vein given that RIM has already created a runtime for Android apps on their devices.

What’s in it for RIM?

RIM gets a solid revenue stream that it can continue to use to develop low cost devices for the developing markets where it is strong, and can hopefully hold onto those markets with the BlackBerry brand and lock users into the BlackBerry ecosystem. As those markets mature, RIM can then introduce steadily more evolved hardware to these developing countries. It also could get access to Amazon’s content which would fill the big hole of how they are going to get great content onto their devices.

Why shouldn’t Amazon buy RIM

Firstly, Amazon doesn’t have to buy and digest RIM, just work tightly with them. It would be cheaper and potentially more effective, although there risks being some development gaps between the Kindle Fire and a RIM sourced phone. These issues could be reduced through co-working environments.

Secondly, as I described in an earlier post, RIM has also a large potential services business with corporations and governments that it shouldn’t leave behind. This is completely vacant territory for Amazon and they would not be able to execute in this arena.

This certainly looks like a great match for these two complimentary companies.