Online retail giant Amazon is looking to release a set-top, video-streaming device in time for the holidays that would likely sell for close to cost.
According to the Wall Street Journal, sources briefed by Amazon said the company is working to release the device for the shopping season.
Known internally as "Cinnamon," the set-top box will likely be sold for around the same price or less than the industry's most popular video-streaming device by Roku. Roku's set-top box starts at $50. Apple's video streaming box, Apple TV, sells for $99.
Apple TV sells for $99
"Based on discussions I've had with other folks in the industry about what they're offering...in terms of hardware they're going low cost," said Brett Sappington, director of research at Parks Associates, a research firm.
Like the inexpensive Kindle reader, which is a venue for Amazon's published content, a set-top box would allow Amazon to sell video content from its existing library, such as its Amazon Prime Instant video service. "Amazon has the third leading video-streaming service in the U.S., and now they're adding hardware to support those things they're already doing," Sappington said.
A set-top box would also be another way for consumers to shop for retail goods online.
In order for Amazon's effort to be successful, however, it will have to offer more than just its own content, according to Jonathan Gaw, a research manager at research firm IDC.
Gaw pointed out that the set-top boxes, or digital media adapters (as IDC calls them), are plentiful. Gaming consoles and broadband providers all offer streaming content. So the next player coming to the market will have to include something compelling to gain any traction.
For example, if Amazon's box doesn't offer Netflix access, it'll be a "non-starter" he said. "The primary reason people stream video to their televisions is Netflix. They're not looking for the next interface," Gaw said.
Amazon would be entering a market that's still marked by uncertainty and confusion about what content is available and when. Many of the players in the field have yet to come together to standardize how and when television shows and movies are released; doing that would be a game-changer in the set-top market, Gaw said.
"Even on Hulu Plus, all the shows there are not consistent. And there you have programmers who have come together under one corporate umbrella," Gaw said.
Sappington agreed, adding that he doubts Amazon will be able to release its set-top box in time for the holiday shopping season. He said the company has just put out an open call for people to develop applications for the device, and that will likely take several months to develop.
Instead, he believes Amazon will release the box shortly after the holidays. If it does push a box out in time for the shopping season, it would likely be a basic model with few apps.
"Then, in the beginning of 2014, they will begin adding third party apps," he said.
Amazon's timing couldn't be much better.
The number of U.S. broadband households with a streaming video media device, such as a Roku or an Apple TV, has doubled since 2011. Today, 14% of households have a set-top box, according to a recent report from Parks Associates.
In just four years, the number of connected TV devices sold worldwide will double, reaching 330 million a year. At the same time, the average price for a set-top box will continue to decline even as annual sales revenue doubles. That's because more households will have smart TVs, gaming consoles, Blu-ray players and streaming video media devices, Parks Associates' said.
Roku is the most-used streaming video media device in the U.S., according to Parks Associates. That's based on an independent survey of 10,000 U.S. broadband households the firm did earlier this year. Among households with a streaming video media device, 37% primarily use a Roku compared to 24% that primarily use an Apple TV.
"Innovations such as next-gen game consoles and 4K or ultra-HD TVs will boost unit sales for these devices, but overall, consumers are reluctant to replace these big-ticket items solely for smart upgrades," said Barbara Kraus, research director for Parks Associates. "As a result, streaming video media devices will have a thriving market, because they can offer innovations such as streaming video at low prices. Devices such as Roku's streaming players and Google's Chromecast will benefit from these market conditions."
In July, Google announced Chromecast, a $35 USB stick will allows consumers to stream Netflix, YouTube, Google Play and other web-based content services to their TVs from smartphones, tablets and the Chrome browser.
Google's Chromecast media streaming device
Paul O'Donovan, a principal analyst at research firm Gartner, said a set-top box allows Amazon to sell to its customers in a way that wouldn't be available on other platforms -- and it would help Amazon gather information on customers from the way they use the box.
O'Donovan believes Amazon is part of a growing trend.
"Definitely more [set-top boxes] will pop up in the near future -- perhaps even one from Intel," he said. "The growth in video consumption appears to have no bounds at the moment. So more consumption will always lead to more players entering the market to satisfy demand."
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