×

Amazon’s Fire TV Box: No-Brainer Strategy, But Will It Light Up Retailer’s Revenue?

Amazon poured millions of dollars into creating the Fire TV device — but it’s not clear when, or even if, the company will see a return on that investment.

Amazon undoubtedly will sell a healthy number of the boxes, much as it has successfully pushed low-priced Kindle tablets to its global customer base. The $99 Fire TV is a hybrid: It offers access to both video-streaming services like Netflix, Amazon Prime Instant Video, YouTube and others, and it’s also designed for games as sort of a poor man’s videogame console.

The jury is still out on how big a footprint Fire TV will achieve, given that Amazon trails leaders like Apple TV and Roku by years and the gaming features aren’t robust enough to give Xbox or PlayStation a run for their money. Analysts also said the $99 price point was too high for the device to change the game, even with its incremental feature enhancements (like voice-enabled search and predictive-analysis technology to enable faster video-stream starts).

“It remains to be seen how well this will sell,” Forrester Research principal analyst Jim Nail said. “But Amazon is a smart company, and they have a strong relationship with not only 20 million Prime users but also millions of other people who purchase from them. This is their strategy to try to build world domination in video.”

SEE ALSO: Amazon Unveils Fire TV, Video-Streaming and Gaming Set-Top for TVs

Fire TV is a logical next step for Amazon, which wants to use it as a conduit to drive content purchases (movies, TV shows, music, games and apps) and provide another reason for customers to sign up for Prime (which boosts e-commerce sales). Indeed, to complete the virtuous circle of content and commerce, Amazon was practically forced to roll out its own set-top to control its direct-to-the-TV destiny — since Apple TV, for one, isn’t likely to play ball with the Seattle e-commerce powerhouse.

Amazon may believe that hardware sales alone could make Fire TV a great business. The company built a better mousetrap, one that’s simpler to use and higher performance than Roku, Apple TV, Chromecast, Xbox, Samsung Smart TVs, or any of the dozens of other TV-connected video devices, according to Peter Larsen, head of Amazon’s Kindle division.

“We are selling millions of these streaming-media devices on Amazon.com,” Larsen said at the Fire TV launch in New York. “We hear from customers every day. We hear about what’s working and what’s not working.”

It’s worth noting that Amazon’s video services are already on many of the platforms Larsen denigrated — including Roku, Xbox, PlayStation and the Nintendo Wii. That should continue, unless those partners have a change of heart with the launch of Fire TV.

Roku, as you’d expect, disagrees that Amazon has crafted an earth-shattering, category-killing box. “We focus exclusively on offering the widest selection of streaming entertainment, simple-to-use players and great value — this has made Roku the most-used device for streaming to the TV in the U.S.,” the company said in a statement.

But Fire TV isn’t just a device: Amazon wants to make buying stuff through the TV one-click simple. Fire TV comes preloaded with a customer’s Amazon account information. It’s offering Netflix and Hulu Plus, because it has to in order to gain traction, but the aim is to make Prime Instant Video the easiest-to-use SVOD service on the box — again, to encourage Prime memberships. Here’s why: In the U.S., Prime users spend around $1,500 per year on merchandise, compared with $500 for non-Prime users, according to Bernstein Research estimates.

Amazon wants to have the best-in-class Internet-video device in a crowded category. The real money, however, isn’t in consumer electronics but in providing a portal to the broader e-commerce catalog, said John Barrett, director of consumer analytics at Parks Associates.

“Amazon sells everything,” Barrett said. “The core features of Fire TV are the media features, but I’d be shocked if we didn’t see e-commerce make it to the device.”

Added Barrett, “Their interest at the end of the day is not be Netflix. It’s to be Amazon.”

Popular on Variety

More Digital

  • YouTube TV Adds Subscription Options for

    YouTube TV Adds Subscription Options for AMC Networks' Acorn TV, UMC

    Google’s YouTube TV now offers two more add-on channels to subscribers, under an expanded pact with AMC Networks: British TV service Acorn TV and UMC (Urban Movie Channel), which features a selection of black TV and film titles. Acorn TV’s add-on channel is now available via YouTube TV for $6 per month and UMC is [...]

  • homepod-white-shelf

    Apple Said to Prep Cheaper HomePod for 2020

    Apple is getting ready to introduce a cheaper version of its HomePod smart speaker in 2020, Bloomberg reported Thursday. The company is also working on a new version of its AirPod headphones for next year, according to Bloomberg. Apple didn’t immediately respond to a request for comment. The new version of the HomePod is said [...]

  • Eminem’s Publisher Sues Spotify, Claiming Copyright

    Eminem’s Publisher Sues Spotify, Claiming Massive Copyright Infringement

    Eminem’s publishing company Eight Mile Style filed a major copyright infringement lawsuit against Spotify late Thursday, claiming that the streaming giant has no license to host about 250 of Eminem’s songs, while also taking aim at the Music Modernization Act, the federal law enacted last year to improve royalty payments for songwriters. The news was [...]

  • iQIYI headquarters building in Beijing

    China’s iQIYI in Talks for Indonesia Expansion

    Chinese streaming firm iQIYI is in negotiations to expand further into Southeast Asia through a venture with Indonesia’s Media Nusantara Citra. iQIYI announced its first step outside Chinese-majority territories in June, when it revealed a linkup in Malaysia with pay-TV leader Astro. It also operates in Taiwan. In April, the company said that it planned [...]

  • Spotify logo is presented on a

    Spotify Triples Free-Trial Period on Premium Service

    Spotify today extended the free-trial period for its Premium service from one month to three, tripling the amount of time listeners can take full advantage of the streaming giant’s offerings without paying for them. According to the announcement, the offer is “always-on/not limited time,” and will roll out across Spotify Premium plans globally: Individual and [...]

  • Moviepass

    MoviePass Confirms Security Lapse May Have Exposed Customer Credit Card Data

    MoviePass, the struggling movie ticket subscription service, confirmed that a security issue may have exposed customers’ records online, including credit card info. In a statement, MoviePass said Wednesday that the security lapse was recently discovered and its system was immediately secured. News of the data breach was first reported Tuesday by TechCrunch, which alleged that [...]

More From Our Brands

Access exclusive content