Netflix Must Keep Amazon's Fire Under Control

Amazon's new set-top box is cool, but it won't be cool enough to topple Netflix.

Apr 2, 2014 at 1:10PM


There was plenty of speculation leading up to today's unveiling of's (NASDAQ:AMZN) Fire TV. How will it stand out in a world that's already seemingly satisfied with Roku, Chromecast, Apple TV, and smart televisions that seem to get cheaper with every passing quarter? Would the leading online retailer price it aggressively to the point that it could give it away for free? Could Fire TV double as a cloud-based gaming console or music source?

Now that the curtain has been peeled back, it turns out that it's nifty in some unexpected ways, but possibly not the game changer that Amazon was targeting.

Yes, it's cool that the selections load quickly. Nixing the "spinner" in favor of what appears to be some serious auto cache action the moment you're hovering over a potential video is neat. Voice recognition spoken directly into the remote is a clever bar raiser, overcoming the lack of a keyboard on the remote. There's also cloud-based photo storage that can set off a slideshow on your screen when it's idle. Nice.

There are also some lofty aspirations beyond video as Fire TV also plays nice with music apps, and there are also thousands of free or nearly free games on the way, including a $40 controller accessory for die-hard players. However, the company that had to be paying more than a casual glance at the unveiling has to be Netflix (NASDAQ:NFLX).

Fire TV streams Netflix, Hulu Plus, and other video platforms, but it will naturally favor access to Amazon's own digital vault of premium shows and movies that aren't available on Netflix, as well as the unlimited Prime Instant Video catalog that it makes available to Amazon Prime members at no additional cost. This is important because, until now, the service hasn't gained the same kind of traction that we've seen with Netflix. Millions of Prime customers have access to a growing catalog of streaming content without paying a penny more, but it doesn't seem to be as sticky as Netflix.

Does this $99 Amazon appliance change everything? In theory, it shouldn't. Prime Instant Video streaming is available through all of the leading set-top boxes already. Amazon's advantage over Netflix -- offering many first-run movies and current TV shows on a pay-per-stream basis -- hasn't gotten in the way of Netflix's growth so far. Netflix closed out 2013 with 44 million global subscribers, and it was forecasting that it would have 48 million accounts by the end of the first quarter that ended earlier this week. 

However, Amazon's packing some pretty impressive specs in this portable set-top device that features a powerful quad-core processor and four times the memory of the entry-level Roku, Chromecast, and Apple TV. Given Amazon's aggressive pricing, it will probably be a cornerstone of the home theater experience for millions of video buffs. That is where Netflix needs to worry, as folks who spend time exploring Amazon's catalog, and making the most of Fire TV's non-video features, will naturally have less time to stream Netflix. 

There's no reason for Netflix to lose any sleep about Amazon's Fire TV just yet, but it wouldn't hurt if it slept through the next few quarters with at least one eye open.

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Rick Munarriz owns shares of Netflix. The Motley Fool recommends and owns shares of and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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