Pagoda Blog

Amazon Developing Device to Stream Video to Homes

May 1, 2013 Inc. AMZN +1.63% is developing a set-top box to stream video content that it may release sometime this year, according to people familiar with the company's development plans.

The device could help build Amazon's brand in the living room, where the e-commerce giant is dependent on other devices to stream its expanding video content available as part of its Prime membership service.

Amazon has been bulking up its streaming video library to compete with Netflix Inc.,NFLX +0.49% Hulu LLC, Time Warner Inc.'s TWX -0.58% Home Box Office and others. The battle has bubbled to the surface in recent months through announcements boasting of newly acquired content and original programming.

Earlier this month Amazon released 14 pilot episodes of shows it may later choose to turn into series available through streaming only. That mirrors a similar strategy from Netflix, which has released two original shows this year—including "House of Cards" starring Kevin Spacey which helped it bring in two million new streaming subscribers in the first quarter.

Today, Amazon users must stream their content through specially equipped televisions, set-top boxes like those sold by Roku Inc., or videogame systems such as Microsoft Corp.'s MSFT +1.50% Xbox 360. Having its own hardware could give Amazon additional data about its customers as well as opportunities to bundle the device with other services.

"Amazon is still dependent on third parties for their streaming business, but with a device of their own, they can control their own destiny," said Jason Helfstein, an Oppenheimer & Co. analyst. "There's still room for yet another low-cost device to stream content."

The field is crowded, though, and could get more so. Apple Inc. AAPL +2.86% has long sold an Internet-equipped device called Apple TV, while Google Inc.GOOG +0.67% has chosen to keep pushing TV software through makers of TVs and other devices; it discontinued plans for a device called the Nexus Q. Intel Corp.INTC +0.80% is working on a video service and accompanying set-top box, which are expected to be available by the holiday season this year.

It isn't clear when Amazon may release the planned set-top box or at what price, though similar devices are available for $100 or less.

Mr. Helfstein noted that Amazon sells its gadgets at closer to their cost of production, preferring to make a profit on the content. That means a possible set-top box could be offered for less than competing devices such as those from Roku, which are available for as low as $50.

Amazon has been expanding its device offerings in recent years beyond devoted e-readers. The Seattle-based company has tried to promote its Kindle Fire tablets as a less expensive alternative to Apple's iPad, touting its qualities for streaming video as well as music and some cloud services.

According to officials at Amazon's parts providers, the company has been developing a smartphone that it may release this year.

Bloomberg Businessweek reported earlier Wednesday that Amazon was developing a set-top box.

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