Is Amazon Building A Set-Top Box?

Senior Contributor
04.25.13 3 Comments

Rumors are currently spreading that Amazon will announce a set-top box sometime this year. But how valid are they, and how likely is it to happen? We weigh the pros and cons.

The Rumors

By all accounts, the rumors boil down to this:

If Apple, Roku, and others can make money on streaming media devices, so too can Amazon. The advantage Amazon has, though, is that it already provides streaming content. So if Amazon decides to give its set-top box customers Amazon Prime subscriptions for, say, one year, the company will be able to offer a better value than rivals even if they charge the same amount for the device.

That’s what some analysts think… and it’s kind of hard to disagree with them on that one.

The Pros

Amazon already has a supply chain in place and experience building tablets, and if anything, a set-top box is a lot simpler since it does need a screen or that fast of a processor. It has a pretty robust streaming video business: Although it doesn’t comment on how many Prime subscribers are out there, it’s suspected to be roughly 10 million. That’s not Netflix numbers but it’s nothing to sneeze at. And that doesn’t include people who just buy episode of a TV show, either.

And, by giving away a year of Prime, Amazon gets a shot at both making a profit on the box and upselling customers to Prime.

The Cons

It’s easy to forget, but Prime’s main goal is to sell more actual, physical stuff; Amazon bolted on the video streaming as an extra, although it’s rapidly grown to a key part of the service. How much in shipping costs is Amazon willing to eat to sell a $100 box?

Also, it may upset partners like Roku and Sony, but Amazon has little interest in removing customers from the market and Roku can undercut Amazon anyway.

So, basically, Amazon doesn’t have much to lose and a lot to gain. Expect to see a set-top box in the company’s future.

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