Amazon’s TV Set-Top Box

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Amazon can succeed by making exclusive deals with movie studios and networks. Netflix doesn’t have the resources to compete with Amazon on this front. Hulu, on the other hand, has their niche — recent episodes of popular TV shows at an affordable price. Netflix has far more to lose than Hulu. At best, Amazon can stunt Hulu’s growth, but they cannot exclude them from most content. Hulu is a partnership of a few major networks — NBC Universal, FOX, and Disney/ABC. Hulu, for the most part, offers content that is complimentary to Netflix, not competitive. Amazon can outspend Netflix and block them from acquiring the best content. It remains to be seen if networks and movie studios will participate in exclusivity. After all, if they can sell content to many players, they can make more money, in theory. Amazon would have to put up a lot of money for exclusive rights, but they have the capital. If they can employ this strategy selectively, with just the right content, it will drive consumers to Amazon.

Both Amazon and Netflix have engaged in content creation. Netflix has produced quality shows like House of Cards, Lillyhammer, and Hemlock Grove. Many people have subscribed to Netflix solely to watch House of Cards. Amazon has also ventured into the original content game with a democratic twist. Amazon customers can view pilot episodes and decide which shows will become series. This adds a whole new meaning to “on-demand”!

The new Amazon set-top box will most likely offer Netflix, Hulu Plus, and YouTube along with other content channels. The Kindle Fire already allows these services. Blocking content would hamper adoption of the device. Amazon doesn’t need to fight the battle in the fore-front. They can afford to produce and buy quality content. Amazon can make some strategic exclusive deals, which will spur adoption of their Prime service.

The set-top box will likely introduce features similar to AirPlay. Samsung has followed suit, with their All-Share technology. Google’s discontinued Nexus Q also integrated with the Android ecosystem. The new Amazon set-top box will likely integrate with the Amazon Kindle ecosystem. One can expect to play music or beam video from a Kindle Fire. Some suspect the device may even be called Kindle TV.

What will this set-top box offer to make it stand out from the pack? Exclusive content is great, but it can only sway some consumers. The fact that Amazon sells content gives them a huge advantage. They could sell the device below cost and steer people into purchasing content. The Amazon set-top box will most likely be a success for Amazon. Much like with the Kindle Fire, Amazon was late to the game, but still had the strategic sensibility and brand loyalty to make it successful. I expect the Amazon set-top box to succeed, without dominating the market. Much like the Kindle Fire, don’t expect anything too innovative.

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