Rumors have circulated about a possible phone since at least 2012 and previous "confirmed" reports like the one from The Verge have been wrong. Amazon stoked the current frenzy of interest by releasing a teaser video on YouTube, ironically a platform owned by rival Google (GOOG):
In it, a number of people (that Amazon confirmed to CBS MoneyWatch were customers and not actors) make cryptic remarks about something they appear to hold in their hands. For example, one woman said, "It moved with me." Other remarks included whatever being seen as "very real life and uncomparable <sic> to anything I've seen."
Many of the people visibly moved their heads and bodies while looking down, as if controlling something on a screen, as is possible with devices like a Microsoft Xbox game console with Kinect. A few of the people held one hand above the device. Some have interpreted the video as suggesting an Amazon phone with a simulated 3D interface. A partial picture posted on Twitter by Amazon could be a phone or, just as easily, the top corner of an ultra-thin notebook or tablet with an unusual interface.
If a phone, it would be a significant step for Amazon in its rivalry with both Google and Apple (AAPL). Because mobile devices have become so important in delivery of consumer video, music, audio, gaming, and publishing, controlling platforms means companies can gain advantage in selling media. To date, Amazon has produced tablets and e-readers, often selling them at close to cost, to take market share and encourage consumers to buy media through the company.
However, getting into the phone business would have some challenges: In the U.S., at least, most phones sell through cellular carriers because consumers typically get new devices with extensions of their service contracts. Amazon might need cooperation from the carriers to get a phone into the hands of buyers. (T-Mobile CEO John Legere teased a June 18 announcement as well, without giving details.)
But there would need to be enough room for profit to make financial sense to the wireless companies. And given the current business model of the carriers, consumers might not see an advantage to a low-cost phone, as most of the price is hidden in monthly fees, so any technical innovation would have to be significant to take attention away from Apple's and Samsung's lines.