Amazon exec admits the Fire Phone was far too expensive

The Fire Phone was initially priced at $199 on contract. Image: Amazon

The Fire Phone was initially priced at $199 on contract. Image: Amazon

There are a number of reasons why the Fire Phone was destined to be a flop, but perhaps the biggest was its price tag. At $199 on a two-year contract when it first made its debut, the device was as expensive as the Galaxy S5, even though its specifications weren’t as good.

Now Amazon’s senior vice president of devices has conceded that the retail giant made a mistake with Fire Phone pricing.

Take a look at its specifications sheet and the Fire Phone doesn’t look like a bad device. It has a 4.7-inch 720p display, a quad-core Snapdragon 800 processor, 2GB of RAM, and a 13-megapixel rear-facing camera. That’s the same kind of specifications you’d expect from a decent midrange smartphone.

The problem is, Amazon didn’t price the Fire Phone like a midrange smartphone. It cost as much as a Galaxy S5 and more than an HTC One M8 on contract, both of which have newer, faster processors, and sharper displays. The Galaxy S5 also has a better camera, and a water-resistant form factor.

“We didn’t get the price right,” Limp admitted during an interview with Fortune. “I think people come to expect a great value, and we sort of mismatched expectations. We thought we had it right. But we’re also willing to say, ‘we missed.’ And so we corrected.”

Back in September, just a month after the Fire Phone first went on sale, Amazon discounted the device to $0.99 on contract. However, the company is still struggling to shift its inventory.

Earlier this month, Amazon CEO Jeff Bezos confirmed the company had lost $170 million largely due to unrealistic sales expectations and promises made to suppliers that couldn’t be kept. In addition, Amazon is currently sitting on around $83 million worth of unsold Fire Phone stock.

Price isn’t the Fire Phone’s only problem, though. Like the Kindle Fire tablets, it runs a custom version of Android designed by Amazon that does not have access to the Google Play Store. Customers can only download apps and other content from the Amazon Appstore, and its catalog is nowhere near as big.

The Fire Phone has also been greeted by mixed reviews.

It seems unlikely at this point that we’ll see a second-generation smartphone from Amazon, but if the company does decide to have one last stab, it will almost certainly be with a low-cost device that could be sold at a loss in the hope that revenues will be made up by the sale of Amazon content.