All devices by Amazon are as we say in the end essentially their aquivalent to stores:
[T]he Fire tablets, the Fire TV, the dash buttons, the Echo, all these are the future of business for Amazon. Not because there is much money in selling them directly but because they are the first building steps of a new kind of online retail platform that is build for and around a world of connected devices. These devices are the future of stores. Or, more precisely, they will do the jobs for Amazon that stores did for stationary retailers.
Amazon’s Hardware Strategy As Seen On The Fire TV
If you look at Amazon’s hardware strategy through this lens everything they do with devices makes a lot of sense. What this means in case of the Fire TV can be seen in parts already today. If you own a Fire TV set-top box (or a cheaper HMDI stick) the homescreen of your (now smart) TV always looks something like this:
- A grid of third-party apps, recently added to your device by you or used by you, apps recently added to the Fire app store and so on
- A sidebar prominently featuring Prime Video for easy access
- Advertisements above and beyond for content on Prime Video
You can see clearly the difference between content living in third-party apps (like movies on Netflix) and first-party content (movies available for streaming via Amazon). The latter gets promoted and advertised a level above everything else. The difference of what this means in every day use is stark. Every non-Amazon app is in the end a second tier service when it comes to the actual user experience. This doesn’t mean it is a bad user experience to use Netflix on Fire TV. It is actually a perfectly fine experience.1 It just means Amazon’s services will always have an advantage on Fire TV over their competitors.
Ah, the benefits of owning the operating system!2
Now what if Amazon decides to put on display in those mentioned ads above not streaming content but other products you can buy on Amazon?
See this screenshot form GeekWire:
GeekWire broke the story first about the new e-commerce functionality on Fire TV and more:
Amazon has quietly rolled out e-commerce functionality on its Fire TV devices, the first step in a broader plan by the tech giant to integrate online shopping and product placement into the on-screen television experience. The test began two weeks ago, and is performing above expectations so far, according to a source with knowledge of the situation.
Next up: GeekWire has learned that Amazon is developing its own shopping channel, like QVC but with the ability to purchase products directly from the screen. That channel is expected to roll out next year.
The company has been hinting at this plan with early online video projects, potentially leveraging technology from its acquisition of the Twitch video streaming service.
In addition, Amazon is looking to integrate products into its X-Ray feature, which currently leverages Amazon’s IMDb subsidiary to display details about shows such as the actors and music. Product integration with X-Ray will let viewers see specific items in a movie or TV show, and then click to easily purchase those products for themselves.
This is not surprising at all. In fact, to be able to do this, and to have control other the full stack -hardware, OS, service layer- for maximum freedom, is the sole reason the Fire TV exists in the first place. It exists to bring e-commerce to the biggest screens in our homes.
This is also the reason why I believe that the Fire TV is the most important part of Amazon’s device strategy.
The Strategic Positions Of Amazon Devices
Here is a run down3:
- The Dash buttons and the Dash are brilliant single purpose devices. They are important but they will always be periphery, not the center of a potentially far reaching platform.
- The Fire tablets are a great (and cheap) gateway for customers into a world of devices by Amazon. But they are only as attractive as the ecosystem Amazon is building around them from app store to connected hardware.
- Same goes for the Fire Phone and its possible successors
- Echo is a great device for power users (not everyone needs to own a dedicated voice controller in their home)
There is a pattern here: The Fire Phone flopped because your pocket computer is only as attractive as the apps that are available for you. It is not just Facebook, it is also your local car-sharing app for example.
To an extent this is also true for the tablet. But the tablet is less of a mobile device as it is being used mainly at home. It needs fewer (niche) apps to be useful to the average user who is using it mainly for watching video amongst other things. (It is nice to own a major video streaming service, isn’t it.)
The main part about Echo is its voice interface platform Alexa, into which all sorts of services are getting integrated/connected to. It is a device for Amazon power users and early adopters. But it is also a starting point for Amazons voice control platform Alexa. Every service integrated into Echo is also available via the Alexa mobile app. But more importantly Fire TV got Alexa voice control in its latest incarnation. This means the Alexa voice interface platform is available via: Amazon Echo, Alexa mobile app, Fire TV.
The Fire TV is the single most important part of Amazon’s device strategy because it has mainstream appeal and is the hub keeping and bringing it all together.
- It does not get more meanstream than enabling video streaming. It is TV after all.
- The set-top box is great value for the money. The cheap version, the stick, is even better on that front. If you don’t need Google Play or iTunes it is the best cheap streaming solution available on the market right now. (And Amazon will make sure to keep it as inexpensive as possible. See Footnote 5.)
- Wifi connection4 means the Fire TV will be able to communicate with Amazon’s servers and the local devices connected to Amazon. (wether third-party or first-party)
- Connection to the big screen means the Fire TV will be able to help organize everything in the cloud (Prime music, photos) and local. (purchases via Dash buttons, services similar to the Dash Replenishment Service and so on)
- The Fire TV can leverage Alexa and bring the Alexa voice platform from its Echo habitat to the masses.
- The Fire TV can integrate on the OS level with the Fire tablets making them more useful. (think TV remote on steroids: additional features for Amazon’s “QVC 2.0”, pre-loaded X-Ray content, ready for parallel browsing while the movie is still playing, and so on)
Big Screen E-Commerce
Lets imagine Amazon’s initiatives to turn the biggest screen in people’s homes into fertile ground for e-commerce pay off. One logical consequence would be that Amazon could even further subsidize the hardware.5 Making good set-top box hardware inexpensive is a great way for competing against other TV platform players like Apple TV which just got a significant update.
Add this to Amazons video streaming service Prime Video, which itself is an integral part of Amazon Prime, and you can see how strong Amazon actually already appears to be in the living room. It’s the power of the bundle, if you will.
- Which of course is necessary. The Fire TV can only be successful if it is a platform on which Netflix et al are usable. It is a hygiene feature for this category. ↩
- Again, this is why Amazon is heavily moving into connected devices. And, again, this is why they tried the Fire Phone. They missed colossally the mobile race. And they, rightly, don’t want to repeat that mistake. ↩
- I excluded the Kindle because hardware wise it is lacking a capability to integrate to other parts of Amazon’s growing ecosystem. It is important for Amazon’s (E-book/book) business but not as important for the platform strategy we are talking about here. It might make sense though for Amazon to include Alexa capabilities into future Kindle versions just to increase the Alexa input destinations and therefore the reach and attractiveness of the Alexa platform. (Also more voice inputs in general mean better data processing here. You have multiple scale effects with this kind of platform. Hence the more the merrier is even more true with voice.) ↩
- It also supports Bluetooth 4.1 and Bluetooth LE. This is important for connecting to other devices. In the future possible other wireless technologies for connecting objects in low range are just a matter of hardware integration. ↩
- Because why would you want to charge people upfront for getting into your ‘stores’? Preferrably you wouldn’t want to charge them at all. (Within a year or two I expect new Prime memberships to come per default with top of the line Fire TV set-top boxes for free. At some point in the future Prime members might even get new Fire TV boxes for free every time the hardware gets updated.) ↩