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Amazon: And Now for Something Completely Different

Amazon is widely expected to reveal a new set-top video streaming device on Wednesday. The company sent out teaser invites to journalists that includea photo of a couch with popcorn and the words, “Please join us for anupdate on our video business.”

Vague? Definitely. But rumors that Amazon has been working on astreaming device have persisted for months, and The Wall StreetJournal last week reported that it also was consideringa free, advertising-supported video streaming service.

Variety, in the meantime, reported that an Amazon spokespersondenied plans to offer a free streaming-media service.

While no Amazon employee has gone on record to confirm aset-top box device, several reputable publications have — over thelast several months — cited unnamed people familiar with Amazon’splans. Hardly a smoking gun, but considering that Amazon saw fit torefute the free-streaming service rumor — but not the device rumor –it’s safe to say Amazon is going to deliver a streaming device.

Inside Amazon’s New Set-Top Video Box

Amazon likely will introduce either a streaming stick like the HDMIGoogle Chromecast or a set-top box like the Apple Apple TV. Or,the company might produce both options — like Roku’s new StreamingStick or more traditional Roku box.

Like the Kindle Fire, Amazon’s operating system will be Android-based.It will provide streaming access to Amazon’s video streaming libraryof movies and TV shows, which currently has two segments. The first isa “free” library of mostly B or C movies paired with thousands of TVshows available for on-demand access to Amazon Prime customers, whopay US$99 a year for augmented fast shipping of retailproducts, with the video access bonus.

In function, Amazon’s Primevideo service is similar to Netflix’s video streaming service. And thesecond part of Amazon’s video library? The company also lets customersrent or buy movies and TV shows on-demand, and this for-paymentlibrary includes Hollywood blockbusters and current-season TV shows.

More of the Same or Something Different?

The real question about this rumor is how might an Amazon-based videohardware device change anything?

Right now, Apple iOS users can stream Amazon Prime content via theAmazon Instant Video app, which even lets them throw the content totheir Apple TV-connected HDTV via Apple’s AirPlay feature. Xbox ownerscan stream Amazon Prime content to their living room HDTVs, too, withthe Xbox-based app. And Roku? Roku owners can use an Amazon InstantVideo app too.

If Apple has sold 13 million or so Apple TVs at $99 a pop, and if Rokuhas sold 8 million or so boxes and sticks at $50 to $99 — and withsome unreported number of Google Chromecast sticks sold at $35 –what’s the big deal if Amazon comes to the living room party?

Answer: ecosystem extension.

With its own hardware, Amazon won’t have to rely on other companies todistribute its content. In addition, Amazon will be able to ensurethat its content gets prime real estate on its device instead of fighting for attention with other apps, channels andservices on every other device.

In fact, Apple doesn’t even let Amazonhave its Amazon Instant Video app directly on the Apple TV device (orAmazon doesn’t want it there; hard to pinpoint why the app isn’tnative on the Apple TV since both Amazon and Apple are mum on thesubject).

Right now, Amazon Prime is just another video streamingservice. After this week’s announcement, Amazon will be able to introduce afull chain of interconnected products and build it’s ecosystem ofcontent. From a consumer-focused position, this means that consumerscan invest in a Kindle Fire tablet and have a content consumptionexperience that’s replicated in their living room.

With Amazon’s hugecustomer base, a set-top box will help ensure that customers keepAmazon top-of-mind — not only for video content, but also for itsPrime service, which also makes buying retail products online withsuper-fast shipping insanely easy. If the Amazon brand is always frontand center in the living room, it stands to reason that shopping forproducts and books also might become more Amazon-focused forconsumers.

All of this helps Amazon pump up customer activity.

Behind the scenes, if Amazon can expand its customer base and usage ofits video services, it simply will gain power in theentertainment world. To reach these customers, Amazon will be in abetter position to negotiate for streaming broadcast rights, as wellas lay the foundation to build content delivery partnerships withHollywood and television studios. Plus, in a new world where Netneutrality is suddenly just a pipe dream, Amazon may begin to be ableto fight for — if not pay for — preferential streaming quality to itsown hardware. In fact, according to one recent report, Apple currently is lookingfor special treatment on Comcast’s cable internet network. Ifthere’s a new content war brewing, Amazon is going to want hardware tofight in it.

Even if Amazon doesn’t angle for special Internet treatment, thecompany already is shaking up the content delivery space by activityinvesting in the creation of new television shows and movies. Amazonrecently released 10 newpilots for possible TV shows to its Amazon Prime customers — andeven solicited feedback from fans to help decide which shows togreen light for full seasons. Apple isn’t doing this.Google isn’t doing this. Roku isn’t doing this. Amazon is.

Remember the wildly successful Stephen King breakout hit, Underthe Dome? Amazon negotiated anew sort of streaming deal that helped goose CBS into producingthe show, which has led to a second season as well as a brandnew TV series with CBS, Extant.

“Our partnership with Amazon for Under the Dome helped build acreative, financial and marketing model for event television in thesummer,” noted Scott Koondel, chief corporate licensing officer forCBS Corporation, earlier this year. “We look forward to using the same model for Extant, a series whose creative auspices, on-screentalent and intriguing concept [are] already generating great excitement.”

Any way you slice and dice Amazon’s video efforts, it’s allnontraditional with few competitors lining up head-to-head — and a hardware device will only make Amazon stronger.

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