Did Verizon's data pricing kill Microsoft's Kin?

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Sue Marek

Less than two months after the launch of Microsoft's much-anticipated Kin social media phones, the software giant announced it will not ship Kin in Europe this fall as planned and will instead integrate its Kin team with its Windows Phone 7 team and focus on future Windows Phone devices.

The quick demise of Microsoft's Kin devices (dubbed Kin One and Kin Two) doesn't come as a big surprise. Although Microsoft has been pushing the gadgets in a high-profile (and costly) advertising campaign, the phones seemed doomed from their launch because Verizon required Kin buyers to pay a hefty smartphone data fee of $30 per month for unlimited data instead of allowing them to pay the typical feature phone data price of $9.99 per month for 10 MB of data.

Microsoft's Kin devices are clearly not smartphones. While they sport a number of social networking features, they don't have the standard computing features of a smartphone and are unable to download and support third-party applications. Verizon justified its pricing tweak by categorizing the Kin as a new type of device that falls somewhere between a smartphone and a 3G multimedia device. It said it expected Kin buyers to use more data because they can browse the Internet and back up multimedia files.

Verizon initially sold the Kin One for $49.99 and the Kin Two for $99.99, but just days ago it slashed the prices to $29.99 for the Kin One and $49.99 for the Kin Two. But even with the price cuts, the required $30 per month data plan likely made many consumers question the benefit of buying a Kin. Why not spend $200 for an HTC Droid Incredible, fork over the $30 per month data fee and and get the full smartphone experience?

Verizon's blurring of the lines between what constitutes a smartphone and a feature phone proved detrimental to Microsoft's Kin. Although consumers may be opposed to usage-based data plans, this is one example where a usage-based plan would have worked in their favor--and Microsoft's favor. Instead of being forced to fork over $30 per month for a data plan, Kin buyers could have selected a data plan based upon their data usage. No one wants to be forced into purchasing a smartphone data plan without having the full smartphone experience.

I expect we will see more examples of operator data pricing hampering device sales in the coming months as operators experiment with different types of data pricing. I also wouldn't be surprised if we saw the other end of the spectrum--data pricing plans helping with device sales when devices are touted for their network efficiency. --Sue