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.
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.
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.
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.
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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