Amazon leaps into home entertainment fray with $99 Fire TV

NEW YORK/SAN FRANCISCO Thu Apr 3, 2014 4:36am IST

A parcel moves on the conveyor belt at Amazon's logistics centre in Graben near Augsburg December 16, 2013. REUTERS/Michaela Rehle/Files

A parcel moves on the conveyor belt at Amazon's logistics centre in Graben near Augsburg December 16, 2013.

Credit: Reuters/Michaela Rehle/Files

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NEW YORK/SAN FRANCISCO (Reuters) - Amazon.com Inc (AMZN.O) made a play for the increasingly crowded home entertainment arena by unveiling the $99 "Fire TV" video and game streaming device on Wednesday, with hopes of boosting its main online retail business over the longer term.

The square device, which just about fits in the palm of one hand, streams content from Netflix Inc (NFLX.O), Hulu and other video services - much like Apple (AAPL.O) TV or Google Inc's (GOOG.O) Chromecast.

It also offers a prominent platform for Amazon's own fast-growing streaming video service as well as its growing slate of original television programs and games. Amazon will also sell a separate controller for gaming that costs $39.99.

Amazon, which has been building its multimedia presence to tap the growing appetite for digital media, is now jumping headlong into the heated competition for consumers' attention and an estimated $70 billion TV ad market. It took the wraps off the Fire TV at a rare Apple-style media event in New York.

Analysts were split on Amazon's prospects. Some said its strategy to pitch the Fire TV as an option for casual gamers would set the box apart. Others were disappointed Amazon did not undercut its rivals' prices in keeping with its pricing strategy on the original Kindle Fire tablet.

"They created a product we didn't need," said Wedbush analyst Michael Pachter.

The Fire TV competes in a market that is set to grow by 24 percent this year, Strategy Analytics said. But that's off a low base: streaming boxes have still not made much of a splash, partly because game consoles from Microsoft (MSFT.O), Sony and Nintendo -- not to mention "smart" TVs and DVD players -- already stream Netflix and other popular services.

Tech leaders from Microsoft Corp (MSFT.O) to Apple Inc are vying for space on the TV, the traditional family entertainment center and where Americans used to spend most of their leisure time. That has changed with the advent of the smartphone and tablet.

The device is one of several initiatives by Amazon, one of the world's largest online retailers, to play a central role in how consumers shop and spend their leisure time. Its projects range from building more warehouses to expand its same-day delivery service to developing original television shows such as the political comedy "Alpha House" starring John Goodman.

If Fire TV takes off, it could help shape the way consumers shop online. Fire TV viewers may eventually be able to use their remote to buy a product directly off a commercial, analysts said, as Amazon's multimedia and online retail businesses become even more integrated.

"The company will eventually want to help you buy things in the living room," Forrester Research analyst James McQuivey said. "Only Amazon can piece that entire experience together in the living room and though we don't see evidence of that ambition here today, we should assume Amazon knows this and is planning on it."

While the company tried to one-up existing streaming boxes with voice-activation and a line-up of games from publishers like Electronic Arts (EA.O) and Walt Disney Co (DIS.N), some remained doubtful the Fire TV will make waves upon debut.

JOHNNY COME LATELY

Amazon's biggest previous foray into tech hardware -- the Kindle e-reader -- succeeded because it was an early entrant in a nascent market. But the Fire TV is a latecomer to two markets that rivals had fought over for years -- gaming and home entertainment.

Amazon has to wedge itself into a market split fairly evenly between various nascent technologies, all of which are challenging cable companies' traditional death-grip on TV viewing.

But the company promised however that Fire TV, available now on Amazon.com, would be faster and easier to use than Apple TV, Google's Chromecast or Roku Inc's streaming video device.

It can predict what the user will watch and cue it up, Kindle unit vice president Peter Larsen said. It also has a feature that uses data from IMDB to identify the music on screen as well as the actors and their filmography as they exit and enter the screen on TV.

"When we look at the living room, how do we make the complexity disappear?" Larsen said at a rare, Apple-style New York product launch event.

Fire TV's remote features a microphone that enables voice-activated search. Fire TV is integrated with Hulu Plus so users can see Amazon shows from their Hulu account, and Amazon said it may bring in other partners soon.

By next month, Fire TV users will be able to play thousands of video games. Amazon decided to develop the device after reading customer complaints on its website about lagging performance, cumbersome search and closed "ecosystems" on rival set-top boxes.

Shares in Amazon ended down 0.3 percent at $341.96 on Nasdaq.

(Additional reporting by Liana Baker in New York, Editing by Richard Chang, Edwin Chan and Andrew Hay)

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