Has the Amazon Phone’s Secret Weapon Been Revealed?

Entering the smartphone market in 2014 takes hubris. It’s a good thing that quality is never in short supply at Amazon (NASDAQ:AMZN), a company that is rumored to be gearing up to release a smartphone later this spring. With Android and iOS already firmly established as industry leaders, and Windows Phone 8 finally catching up feature-wise, it’s obvious that Amazon will need something big up its sleeve to make headway in the marketplace. According to a report by BGR, it looks like that something might be “Prime Data.” What is Prime Data? It’s not totally clear yet, but multiple sources who spoke to the publication were able to make predictions based on their knowledge of the company’s plans. BGR’s sources “believe Amazon may be planning to offer smartphone buyers free access to its various Prime-branded digital services.” That means that anytime customers use their Amazon phone to download or stream music, movies, or TV shows from Amazon, the data used would be free and wouldn’t count toward the data cap determined by their plan. The sources also said that the Amazon phone would be available exclusively on AT&T’s (NYSE:T) network. Adding credence to the Prime Data rumor is a program AT&T recently implemented, called Sponsored Data. Sponsored Data lets companies pay for data that’s spent when customers use their apps or media. Amazon’s Prime Data program would be similar, but would only apply to people using Amazon phones. This is still just speculation, and BGR reports that “Other theories floated by our sources include a simple discount plan that will offer significant savings compared to typical smartphone data plans, or perhaps a deal that will give users free data for a certain number of months after their initial purchases.” Neither of those theories are as exciting as the big Prime Data one — which doesn’t mean they’re not true, but they would be a big missed opportunity for a company looking to edge into the very crowded smartphone market. The Prime Data theory certainly sounds like something Amazon would do. The company has always sold its hardware at the cheapest possible price, and it relied on media purchases to make up for the lost revenue. Amazon’s Kindle, Kindle Fire, and Fire TV all sell for very low prices, considering the technology packed into them. But because the software is so tightly woven into Amazon’s media stores, Amazon continues to make money from the devices. Also, the Prime Data plan is not without precedent. Amazon has long let customers download books to their Kindles over 3G without charging for the data. As long as a consumer is spending money on content from Amazon, it seems Amazon is happy to foot the bill of delivering it. Of course, there’s a big difference between downloading a 200KB book and streaming a high-definition movie — but the idea is the same. If the Prime Data theory is true, it’s a pretty smart move for Amazon. It accomplishes a double-whammy of making the company look good by cutting down on customers’ data bills, and it also encourages customers to make media purchases through Amazon, rather than through Google or Apple’s media stores. That’s a win-win for Amazon, and as good a reason as any for customers to buy an Amazon phone. More From Wall St. Cheat Sheet: