Can Amazon Fire Up the TV Market?

Amazon’s new TV-connected streaming box isn’t looking to turn the pay TV industry upside down, but it is taking dead aim at a market that’s dominated by Apple TV, Roku and the Google Chromecast.

Early on, Amazon’s slim and snappy device, which began shipping on April 2, will actually support the pay TV model to a degree by providing access to authenticated apps from Showtime Networks and WatchESPN, with Watch Disney Channel and Watch ABC among those on the Fire TV’s “coming soon” list. Notably absent so far: HBO Go.

The device also comes with the usual over-the-top suspects, including Netflix, Crackle and Amazon’s own video apps, as well as a gaming service stocked with a library of free and low-cost ($1.85 a pop, on average) titles.

The Fire TV box can stream in 1080p HD and is being paired with a remote control with voice-search capabilities. A recommendation engine called ASAP (Advanced Streaming and Prediction) will pull up movies and TV shows based on viewer interests and will start to buffer those titles for playback even before the play button is pressed. Amazon is also selling a separate, optional game controller for $39 that can double as a remote control.

Amazon’s new entry will be going after the similarly priced $99 Apple TV, the $35 Google Chromecast and the Roku product lineup, which includes a recently launched $49.99 HDMI streaming stick that complements its $99 high-end Roku 3 device.

Though Amazon is arriving later to the market, that market is not yet saturated. Just 14% of U.S. broadband homes had a video streaming device by the end of 2013, according to Parks Associates. The research firm expects sales in the product category, which also includes gaming consoles, to hit 330 million units by 2017, nearly twice last year’s total.

But at least one analyst was surprised Amazon did not launch Fire TV at a lower price and more closely follow the model it has established with its Kindle Fire tablets by selling them nearly at cost to seed the market for its electronic retailing prowess.

“It’s not a full retail product like the Kindle,” Colin Dixon, chief analyst and founder of nScreenMedia, said. “It [the Amazon Fire TV] is definitely on the upper end. They’re essentially saying, ‘Apple is my competition,’ although Roku also has boxes in that price range.”

Staying a smidge below $100 is smart, but Amazon’s new gizmo falls short of an impulse buy. “The Chromecast is a no-brainer; you just buy it,” Dixon said. “I don’t think [Fire TV] will be a barnburner like the Chromecast is … This is not going to unseat Apple TV.”

Google, which recently expanded sales of Chromecast to several international markets, has only said sales are in the “millions” of units. Last month, Apple CEO Tim Cook said total sales of the Apple TV breached $1 billion last year, meaning that Apple likely sold about 10 million units in 2013.

Dixon said the Fire TV would be considered “overpriced” if all it did was stream video. Amazon is adding value with the gaming capability, which he views as a “wild card.” “But can they turn this into a mid-tier gaming console?” Dixon asked. “That’s the great unknown.”

But others said they believe Amazon’s new gizmo has hit the mark and then some.

“They achieved some of the table stakes that are critical for Amazon in such a device,” Jonathan Weitz, a partner at IBB Consulting Group, which works with cable, media and wireless companies, said. Fire TV’s gaming capabilities and integrated voice-search functions could help to set the product apart from its peers.

Because the Fire TV is not a pay TV replacement, Weitz said, it would be beneficial for operators and programmers to step up and develop authenticated apps for Fire TV. Because Fire TV uses a “forked” version of Android, it should not present a big challenge for media companies and distributors to target if they’ve already developed TVE apps for Amazon’s Kindle Fire tablets.

“This model is not unique,” said an engineering exec utive who is familiar with Amazon’s flavor of Android and the Fire TV. “If you’ve got the DRM (digital rights management) and backend working for one device, you can port most of that to the new device.”