Thursday, April 25, 2013

Amazon's Trojan Horse: Developing Set-Top Box

Amazon created the Kindle to breathe life into electronic books. They then came out with their own tablet, the Kindle Fire, which took over the low end of the tablet market. Now according to a Bloomberg Businessweek report, it appears that Amazon will be looking to stream video to TV sets which their own set-top box, which will compete directly with Apple TV.

The company is developing a television set-top box, which Amazon hopes to have available in the fall of 2013, and has begun discussions with outside providers of content to distribute their video services to the device, according to three people briefed on the plan, who spoke on condition of anonymity because the Amazon product had not yet been announced and remained confidential.

At first, it may not seem immediately clear why Amazon would want to sell their own set-top box as their video service is available, as an app, on hundreds of devices including gaming systems, digital video recorders, television sets and DVD players. However, these existing devices don't put Amazon's services front and center, which would be one reason for Amazon to develop their own set-top box.

Another reason to introduce the set-top box could be viewed as a 'Trojan horse" which is to say that Amazon hopes to get additional subscribers to Amazon Prime. Part of being a Prime member, aside from free two-day shipping on products shipped directly from Amazon, is the ability to stream more than 40,000 movies and TV episodes for free. Amazon does have a much broader library, totally over 150,000 titles, that anyone, including non-Prime members, can buy or rent. 

Additionally, it's all about the content.  Amazon has actively been developing a studio giving them the ability to create their own original content. The kind of content that would be perfect for their own set-top which in turn could generate additional subscribers to their service.

Finally, it wouldn't be a surprise if Amazon started to add commercials to their original content as well as the content that's currently available to Amazon Prime members. They can even analyze data from their customer's purchasing history and then figure out and tailor the advertisements specifically for each individual. Or,

Amazon could allow for interactive product placement, allowing brands to pay for product placement in Amazon's original content and then allowing people to make purchases from the set-top which would be associated with their prime account. 
Even though Amazon is late to the game, they could undercut the competition on price, just as they did with the Kindle Fire. With a competitive price and the amount of content that Amazon currently has and is looking to create, their set-top box could be a huge success. 

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