Amazon Execs Admit They Shot Themselves In The Foot On Fire Phone Pricing

So, how's that Fire Phone working out for you? Oh, you don't own one? Welcome to club. If you're like the vast majority of smartphone owners, you're carrying a handset made from Samsung, Apple, or even HTC. But the Fire Phone? It was supposed to be Amazon's next big thing, like the Kindle, only it wasn't. And if you ask Amazon what went wrong, the company will tell you it priced the Fire Phone all wrong.

"We didn't get the price right," Amazon Senior Vice President of Devices David Limp to Fortune in an interview. "I think people come to expect a great value, and we sort of mismatched expectations. We though we had it right. But we're also willing to say, 'we missed.' And so we corrected."

Fire Phone

Limp might be onto something. Whereas the Kindle Fire quickly became one of the hottest selling tablets around by undercutting the iPad and even other Android tablets on price, the Fire Phone stuck to the subsidized smartphone script by commanding $199 for the 32GB model and $299 for the 64GB version. At those price points, the Fire Phone put itself in competition with high-end handsets that had already established themselves.

Lo and behold, Amazon last week revealed that it was sitting on $83 million worth of unsold Fire Phones, which is a big reason why the company took a $170 million charge for its fiscal third quarter of 2014. It also prompted Amazon to essentially start giving Fire Phones away for free, on contract -- the company now charges a measly $0.99.

Amazon Fire Phone Listing

However, while Amazon overestimated how much people would be willing to pay for its handset, there's no guarantee that dropping the price to a penny shy of a buck will turn things around. The Fire Phone has a 2.5-star rating out of nearly 3,500 customer reviews on Amazon, and the complaints aren't solely about price. Customers have taken issue with the battery life, how hot it runs, and the lack of popular apps like YouTube, Hulu, and Snapchat.

On the plus side, the Fire Phone comes with a full year of Prime membership benefits, but that's hardly a reason to tolerate to a sub-par smartphone.