Amazon's Rumored Console Could Be a Game Changer

The American online retailer Amazon.com (NASDAQ: AMZN  )  has shaped the market for consumer goods in the digital age. One of the largest online stores, Amazon has also branched out into the production of consumer electronics. The introduction and development of its Kindle e-reader platform proved successful. Now, there are rumblings that the retail giant is positioning a home entertainment box for a fall release.

Amazon Box

Early rumors had pegged Amazon's mystery box as a gaming console. The ability to play games will likely be only one of the device's features. Amazon has a clear interest in getting its services into as many hands as possible. The company is in a great position to deliver a competitively-priced multimedia box that could have a major impact on the gaming, streaming, and digital download markets. While many analysts have been quick to pronounce the coming death of the dedicated console video game market, a rush of new entrants indicates that companies see markets that are not being serviced. Of the new companies hoping to carve out a segment of the market, I believe that Amazon is in the best position to do so and capitalize for long-term gains.

Power Vacuum

The release and breakout success of Nintendo's (NASDAQOTH: NTDOY  ) Wii console proved that there was an untapped market for video games. The system enjoyed tremendous success in the early years following its release because of its ability to attract casual demographics. With its successor, the Wii U, failing to garner any kind of notable sales traction, it appeared that the market for casual games on consoles has evaporated. However, with the right price point and value proposition, this may not be the case.

Last console cycle, Nintendo managed to sell 100 million Wii's worldwide, with Sony (NYSE: SNE  ) and Microsoft (NASDAQ: MSFT  ) selling approximately 80 million each of their respective PlayStation 3 and Xbox 360 platforms. While Microsoft and Sony are set to battle it out for the dedicated console gaming crowd, Amazon has the opportunity to court the audience that found the Wii so appealing. Given the right price and conditions, the box could even be a serious threat to the soon to be released PlayStation 4 and Xbox One.

If Amazon is serious about breaking in to the gaming space, it has the opportunity to make a major splash this holiday and create a Trojan horse for its services. By making its prospective box Android-based, Amazon also ensures the benefits of a built-in library and support. A $99 console in conjunction with a revamped design layout interface for Prime Instant Video has the potential to be an extremely disruptive market force.

Core Constituents

The Amazon console likely will not compete in the same high-end market that Sony and Microsoft are fighting for. Its rumored Snapdragon processor suggests a happy medium of performance and affordability. Still, if Amazon launches its system at an affordable price or packages it with Prime membership, it could steal some of the thunder from Microsoft and Sony's boxes.

Microsoft in particular has found difficulty in promoting its Xbox One to potential customers. The company has done a good job of reversing many of the initial problems that dogged the Xbox One, but I suspect that substantial damage has already been done to the brand. Recent news that the Xbox One will now be able to function without the Kinect camera plugged in suggests that Microsoft is preparing for the hurdles a $499 Xbox One faces at market. If sales are slow during its first year, expect a cheaper SKU that jettisons the Kinect device.

Meanwhile, Sony has been enjoying generally positive responses to its PlayStation 4 plans. The system will debut at $399 this fall. With more powerful hardware than the Xbox One and a comparable selection of games and exclusive content, this system looks to emerge as the global sales winner in the console space. Still, the Japanese transition to mobile gaming leaves Sony with a smaller addressable market. As evidenced by Sony's planning and strategy for the PS4, this makes the American and European markets more important than ever.

Multiplayer Games

Hardly by coincidence, Amazon's entrance in the console space has the potential to make a major impact in the Western territories. Its rumored home entertainment box could be a hot holiday item if it lands with the right price and promotions. The company is a few smart decisions away from being a disruptive force in gaming and furthering its streaming and service ambitions.

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Read/Post Comments (19) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 03, 2013, at 5:43 PM, Debase wrote:

    Amazon isn't claiming anything if they release a "gaming console" there already are Android consoles on the market Ouya for one and nothing is being released for it it's pretty much dead in the water. Amazon can't offer anything different or new that isn't available on Xbox or Playstation.

  • Report this Comment On September 03, 2013, at 6:52 PM, TelsaRowe wrote:

    "Game changer" ....ya right. Wont help the unprofitable company turn a profit. A console is only as good as its games and nobody buys a console to play mobile games. They buy a console to play AAA titles. Sounds like another failed amzn product.

  • Report this Comment On September 03, 2013, at 7:26 PM, amenamerica wrote:

    Most of all, nobody wants some bloated spyware Android garbage that is going to crash in the middle of each game.

  • Report this Comment On September 03, 2013, at 7:30 PM, BayAreaBill1 wrote:

    Amazon is moving well out of its core competency if they get into the game console business. Also, sales and profits will be so limited that they won't affect their bottom line much. Amazon's core strength, except for Kindle which is book-related, is being a single-source provider for an extremely broad spectrum of products that other people spend big bucks to develop and produce. In this case, they should stick to their core competency and not try to compete with established powers in the gaming market.

  • Report this Comment On September 03, 2013, at 7:46 PM, josh995 wrote:

    I doubt it will be a game changer. People said the same thing about the Ouya console, and that hasn't changed a thing. I read that only 1 out of 3 Ouya console owners have actually purchased a game...

  • Report this Comment On September 03, 2013, at 7:58 PM, moopert wrote:

    Yea... the same thing will kill this as killed the wii in it's later years, and is killing the Ouya. Lack of quality games.

  • Report this Comment On September 03, 2013, at 8:16 PM, djtetsu wrote:

    Agreed with BayArea. The problem with Android games is that developers had it in mind to attract players on a phone.. If I wanted to play Fruits ninja I will just play it on my phone.

  • Report this Comment On September 03, 2013, at 8:33 PM, steel77 wrote:

    This will be nothing more than an OUYA that requires you to subscribe to Amazon Prime. I made the mistake of wasting $99 on that "game system". I wont make that same mistake twice.

  • Report this Comment On September 03, 2013, at 8:42 PM, excelscior wrote:

    Snap dragon CPU? Isn't that what some cells phones use? Wouldn't the Tegra 3 Quad CPU be stronger?

  • Report this Comment On September 03, 2013, at 8:52 PM, toddze wrote:

    ahhhhhh, these people drive me nuts, gamers want games first and foremost, gamers do not want a "multimedia box"! that is what a computer is! These companies try to force these multimedia boxes onto gamers, M$ being the worst culprit I am glad to see gamers finally taking a stand against Xbox one, sony was guilty of it with the PS3, but I think they finally figured out with the ps4 that gamers are concerned about GAMES, and PRICE.

  • Report this Comment On September 03, 2013, at 9:56 PM, Terikan wrote:

    what a worthless article. Wait until there's something more than just a rumor.

  • Report this Comment On September 03, 2013, at 10:20 PM, ShadowOfTheVoid wrote:

    Game-changer? Amazon's rumored console will not be anything of the sort. It will likely end up in the dustbin of gaming history alongside the numerous other consoles that failed to make an impact. Of all the myriad console brands that have ever existed, only five have managed to have any sort of widespread commercial success: Atari, Nintendo, Sega, PlayStation, and Xbox. Of those, only Nintendo, PlayStation, and Xbox remain, Atari and Sega both only had one really popular system each (the 2600 and Genesis, respectively) and both made mistakes that eventually forced them out of the market.

    And what made these five brands household names? The games. The old web adage "content is king" also applies to game consoles as well. The 2600 had ports of popular Atari arcade hits like Asteroids, Missile Command, and Space Invaders. The NES had Super Mario Bros. and Legend of Zelda. The Genesis had Sonic. The PlayStation had several titles, including Tekken, Crash Bandicoot, and Resident Evil. Xbox had Halo. It was these popular "killer apps" that made these brands household names and got people to buy these systems by the tens of millions. The lack of such content is why all these wannabe upstarts like Ouya and the others are doomed to have essentially no commercial success. They may find a very small niche somewhere, but they will never be able to swim with the big fish. It would probably be best if Amazon didn't even bother making a console and stuck to online retail.

  • Report this Comment On September 03, 2013, at 10:25 PM, speculawyer wrote:

    LOL. The Motley Fool articles on videogames are terrible. Yeah, some Android console is a 'game-changer'.

  • Report this Comment On September 03, 2013, at 11:17 PM, tbanthony wrote:

    Casual gamers have migrated to playing on their smartphones and tablets. Something that was still in it's infancy when the original Wii came out. I am a casual gamer and use my iPad 99% of the time rather than my Wii and PS3. Games are free or reasonably cheap instead of $40 to $60. Great for casual gamers. Any casual gamer consoles are DOA in my opinion. Even my kids prefer to play on my iPhone or iPad compared to their Nintendo 3DS. The 3DS is the backup. Instead of plunking down $20 to $40 for 3DS games, I'd rather buy them an iPad mini and just download some cheap games. After only 10 games, it's going to have paid for itself and it will be so much more useful for reading, math, etc. for the next several years. Ditto for Android fans I would think.

  • Report this Comment On September 03, 2013, at 11:20 PM, badkat7 wrote:

    If not an external media/gaming console, then what? If you want to game on the TV your only other choice is a Media PC or a Smart TV. The problem with Smart TV is simple - a TV today has a life expectancy of upwards of 25 years whereas any console goes out of date, to one degree or another, every 2 to 5 years. Since big screen TV's are expensive, which would you rather swap out? An entire Smart TV or just the console itself? I know which I would prefer!

  • Report this Comment On September 03, 2013, at 11:25 PM, tbanthony wrote:

    ... And regarding having a Android console so you can view the games on the 'big screen' or have a dedicated controller. A big so what for casual gamers I think. An iPad screen from 12 inches away looks just as big as my 55" TV sitting 12 feet away. Just the idea of turning on a dedicated console and switching inputs on the AV Receiver & TV is like... yuck! I could have already been playing on the iPad like 30 seconds ago already. While touch screens aren't perfect for all games, there are so many great games out there that I don't miss the dedicated controller "hard core" games.

  • Report this Comment On September 03, 2013, at 11:44 PM, Risky88 wrote:

    This is the first I have heard of this type of rumor

  • Report this Comment On September 04, 2013, at 1:36 AM, spinod wrote:

    They said that about Ouya too.... hell aren't tablets supposed to kill consoles by now??

    Yeah, Amazon already said the gaming side of it isn't even the focus. Its just a box to help them get into the living room like google and Apple already did. Its more for apps and helping their streaming services. Gaming is just a good way to get that going, ask Sony.

  • Report this Comment On September 04, 2013, at 1:55 PM, Speedracer69 wrote:

    There would be no reason for Amazon to make a gaming console if its not going to play ball with the high end consoles like Xbox1 and PS4. The PS3 and Xbox 360 are the mediums and I very seriously doubt people would invest in Amazons device. I am going to wait it out on PS4 because I am sure its going to have a lot of bugs to work out and then I will invest. I do not like unfinished products just like everyone else.

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