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Cable Technology Feature Article

April 03, 2014

Slam Dunk or Bitter Disappointment? Analysts Mixed on Amazon Fire TV

By Tara Seals, TMCnet Contributor

Amazon has finally gone to market with its hotly anticipated over-the-top (OTT) set-top box, dubbed the Fire TV. At $99, the tiny box directly takes on both Apple (News - Alert) TV and the Roku 3, but it packs in a series of differentiators that Amazon is banking will be enough to make the gambit a success. But analysts were mixed on the outlook for the device, to say the least.

In fact, some were downright negative. As Stock Trader Daily analysts put it rather bluntly, “The introduction of a set-top box by Amazon is a huge disappointment.”

Businessweek broke the news about the plan last year, which calls for a standalone box that has built-in access to an à la carte video on demand (VOD) store, which features newer films and TV shows, and Prime Instant. Amazon originally prepped the launch for the 2013 holiday shopping season, but had to postpone the debut for undisclosed reasons.

Sources said at the time that is was also likely that Amazon would take an aggregation approach to third-party content for the STB. This is indeed the case: it ships with Netflix, Hulu (News - Alert) Plus, WatchESPN, YouTube and Showtime, but it also has the FreeTime Unlimited subscription service—Amazon’s all-you-can-eat content subscription designed for kids ages 3 to 8. Meanwhile, the on-demand library has 200,000 movies and TV episodes from Amazon Instant Video.

It also offers access to a variety of music and game options. For music, owners can listen to music with Amazon MP3, Pandora (News - Alert), iHeartRadio, TuneIn and others. And the gaming stable includes the wildly popular Minecraft, Monsters University, The Game of Life, The Walking Dead, NBA2K14, Asphalt 8, Riptide GP2, Despicable Me: Minion Rush and others—the average price of paid games is $1.85. Users can play using the Fire TV remote, the Fire TV app for smartphones and tablets, or the optional Fire game controller.

“Tiny box, huge specs, tons of content, incredible price—people are going to love Fire TV,” said Jeff Bezos, Amazon.com (News - Alert) founder and CEO. “Voice search that actually works means no more typing on an alphabet grid. Our exclusive new ASAP feature predicts the shows you’ll want to watch and gets them ready to stream instantly. And our open approach gives you not just Amazon Instant Video and Prime Instant Video, but also Netflix, Hulu Plus, and more. On Fire TV you can watch Alpha House and House of Cards.”

The video aspects are fairly standard for OTT services. But the gaming adds a new dimension, some industry watchers said. Noting that it believes that we will see a future release of a hybrid Apple (AAPL) media streaming/gaming box for the living room, Alcaraz Research said in an investor note that “Jeff Bezos already beat Tim Cook to the finish line. Amazon may soon unseat the Apple TV from its leadership position in the streaming devices market. Apple currently enjoys a healthy 43 percent share of the said market.”

In the plus column, Amazon is also upping the ante with a few additional aspects to the launch. For instance, it is also releasing new developer tools for third-parties to create PC, console or Android mobile apps and games for Fire TV—a decision that could create a large ecosystem of additional value for users. Fire TV is based on Android, so the platform will be somewhat familiar to existing Google developers (many of whom, it should be noted, are also likely writing for the Google Chromecast dongle).

Amazon is opening up a new platform for developers with tools that include sample code, as well as documentation and guidelines to help developers design and build living room experiences, including how to manage the input for the Fire game controller and Fire TV remote.

"Developers are already finding monetisation success with the apps they offer for Kindle Fire and in the Amazon Appstore. Fire TV is the newest reason for developers to bring their apps and games to the Amazon platform," said Mike George, vice president at Amazon Appstore and Games. "Fire TV is an opportunity for a broad group of developers--whether it's existing Android developers or those focused on console, or PC development--to reach into the living room and engage a whole new set of customers who love entertainment. We already have many great developers on board like 2K, AOL, Bloomberg, Clear Channel (News - Alert), Disney, EA, ESPN, Gameloft, Hulu, Mojang, Pandora, SEGA, SHOWTIME, Telltale, Ubisoft, and Vevo--and with today's announcement we expect many more to join."

It also outspecs the competition, with a quad-core processor with what the company said is more than three times the processing power, a dedicated GPU, and four times the memory.

Altogether, Alcaraz said that Amazon could have a winner on its hands. “The new $99 Amazon Fire TV with its support for Android games and apps offers a serious challenge to the current non-gaming compatible Apple TV,” it noted. “The Fire TV offers more features than other existing streaming devices. It has the same price that of the Apple TV, but Amazon's product has better technical specs and offers more features.”

However, not everyone is as bullish. “Smart TVs come with an Internet connection pre-installed, and although Apple's set-top box was timely because there were no alternatives when that was introduced years ago (smart TVs were not popular), Amazon's decision to get into the set top business is not only ill-timed, but a complete waste of time,” said Stock Trader Daily analysts.

It added that the focus should be on content not on hardware. “People who have smart TVs are moving away from additional equipment anyway, so adding equipment is somewhat counter-trend as well,” it said. “[There are] significant limitations between the current streaming media providers, Hulu, Netflix (NFLX), and Amazon, because they seem to have stopped paying up for movies and other third party media. For example, Amazon Prime had offered Suits and Downton Abbey for free to its Prime customers before, but apparently the costs were too high, and they now charge for those shows.

The only free movies and television you can find on Amazon now are the ones you can find for free in other streaming media services too, making them all seem similar. The standout is of course Hulu, which is owned by the companies that produce the majority of the television content, but Hulu's business model is based on running ads, in addition to paying for Hulu Plus of course.”

Edited by Cassandra Tucker

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