Why Amazon’s Fire TV Should Scare Sony, Nintendo, and Microsoft

Just because Amazon  (NASDAQ: AMZN  )  isn't positioning its new set-top box as a game console doesn't mean it's not a threat to Microsoft's  (NASDAQ: MSFT  ) Xbox One, Sony's PlayStation 4 (NYSE: SNY  ) and Nintendo's (NASDAQOTH: NTDOY  )  already struggling WiiU. 

The $99 device, which has an optional $39 game controller, is being pushed as a competitor to Roku, Apple  (NASDAQ: AAPL  )  TV, and Google's  (NASDAQ: GOOG  ) Chromecast first and foremost, but gaming is part of the package.

Amazon is clearly positioning the device as a video player first, describing it as "the easiest way to enjoy Netflix, Prime Instant Video, Hulu Plus, WatchESPN, low-cost video rentals, and more," in a letter from CEO Jeff Bezon on its home page Thursday.

But while delivering video seems like the prime reason behind the launch, Bezos could not help but gush about the games that will be offered on the platform. "As a bonus, we also added games. With Fire TV you can play blockbuster titles like MinecraftThe Walking DeadMonsters University, the Amazon exclusive Sev Zero, plus great free games. There are over a hundred titles to explore, with thousands more coming soon. These games are a great value — the average price of paid games is only $1.85."

Fire TV offers access to all the major video apps like its set-top box competitors do, and it offers them along with an impressive selection of popular games like the consoles do. That may not make it a clear alternative to a $35 Chromecast and some low-end Roku models, but the Fire already offers a better deal than Apple TV. On the console side Fire may lack the high-end games like the just-released Titanfall, but at $139 for the Fire plus the game controller it's a sensible choice for a family looking for a multi-purpose device at a low cost (and the cheap games help too).

Xbox One and PS 4 are at the beginning of their life cycles and while customers are not likely to replace a just-purchased high-end console with a cheaper device, it's easy to imagine parents letting Amazon control their living room and foregoing the more expensive consoles.

Amazon insists it isn't a console

While Bezos was touting the gaming benefits of the Fire, Amazon Vice President Pete Larsen was insisting to Engadget that Fire TV "isn't trying to be a game console."

In the strictest sense it may not be. While the device has impressive specs for a set-top box --  a quad-core processor, dedicated GPU, 2 GB of memory, dual-band, dual-antenna Wi-Fi, high definition 1080p video, and Dolby Digital Plus surround sound -- it's not as powerful as an Xbox One or a PS 4. That might keep hardcore gamers on the consoles, but it's not likely to be a major deterrent for the younger generation, which has grown up playing simpler games like Minecraft and Angry Birds on their tablets and phones.

With Fire TV Amazon not only brings those games to the television screen, it's looking to grow its own category of game specifically for Fire TV. The company has been mass hiring veteran game developers, according to Engadget, and bought the game studio Double Helix. 

"We're taking this very seriously; we're committed; and we're making big investments," Mike Frazzini, who is leading the games team for Amazon, told Engadget..

Amazon builds new categories

When it launched the Kindle Fire Tablet Amazon effectively created a market for lower-priced high-function tablets. The Fire tablet isn't as good as an iPad but it's pretty good for a much lower price, which likely brought people into the tablet market who otherwise would not have jumped in. The Fire TV has a chance to do the same for the console market, winning Amazon not only customers looking to stream video but ones looking to play games as well. That's potentially huge because, as you can see in the chart below (from Gartner) while the mobile games market is growing, the most dollars are still spent on console games.

Video Game Market Revenue, Worldwide, 2012-2015 (millions of dollars)

Segment

2012

2013

2014

2015

Video Game Console

37,400

44,288

49,375

55,049

Handheld Video Games

17,756

18,064

15,079

12,399

Mobile Games

9,280

13,208

17,146

22,009

PC Games

14,437

17,722

20,015

21,601

Total Video Game Market

78,872

93,282

101,615


111,057


Fire TV gives Amazon the only viable option for playing mobile games on a television and it should let the company steal away some of the console audience.

Amazon could win big here

Fire TV gives parents a way to tell their kids no when it comes to buying a $399 PS 4 or a $499 Xbox One. The gulf in price between the true consoles and Amazon's not-really a-console is so huge that it's not like Sony or Microsoft can compete with a simple price cut. The battle being waged between all the companies mentioned here is to control people's living room. 

The gaming consoles will have an audience among people into the most complicated games that require the processing power of an Xbox One or a PS 4, but most folks just want a device that's fun. If Fire TV has good games that are entertaining, that'll be good enough for a lot of people. Not every hit game needs to cost $200 million to develop as the recent Flappy Bird sensation definitively proved. Playing a game on your phone is not as impressive as playing even the crummiest game on a high-end console, but that doesn't matter if the phone game entertains you. 

Amazon has a chance to be the good-enough console option for millions of households -- much like Nintendo's original Wii was during the last console generation. Fire TV may not replace the high-end consoles but it should steal some market share while also bringing new customers to TV-based gaming who never would have spent the money for an Xbox One, a PS 4, or even a WiiU.


Read/Post Comments (2) | Recommend This Article (1)

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 April 04, 2014, at 2:40 PM, strattitarius wrote:

    Mine arrives tomorrow - but the game controller won't ship for another 3 weeks. I will update you guys on my thoughts after some testing.

    My real hope is that my family can make use of Prime Instant Video. I have watched on my laptop, but we haven't used it much since I don't have (or care to setup) a media server hooked up to my TV. Hopefully this device will make it a better value. And I think this point is exactly what Amazon was hoping the Fire would do.

    I am also interested in the games. My young son will probably love the level of gameplay that is available via the Fire. When he turns 10, he will need an Xbox. He already plays on the Xbox 360, but most of the games are not much more advanced than Minecraft.

    The funny thing, that isn't that funny, is that this doesn't replace anything in my entertainment center. it just adds to the clutter. TiVo (old - before streaming), Blu-Ray player (that streams from netflix), Xbox 360 (that also streams from netflix), cable modem, wireless router, and now a Fire box.

    In fact, if I was in the market for a new Tivo and wanted to spend $1000 (roamio + lifetime sub) I might go that route as they now stream Prime as well. However the Fire was a decent stop-gap.

    All in all, I am not sure the Fire will be a game changer. Those looking to buy a set top device such as Apple TV, Roku, or Fire, might lean to the Fire if they have Prime already. It might be another reason Prime makes sense to the consumer. But I doubt it's going to put Xbox, playstation, or Tivo in a bind. It doesn't seem like it will impact Netflix since it will work with that too.

    I think the lukewarm reception to the Fire was probably appropriate. It came out at the right time for me to purchase one, but if I had made the leap into steaming video earlier, they would have missed the boat. If I wasn't already a Prime member, I probably would have bought a Chromecast. Going forward I can't see what it brings to the table that Chromecast doesn't, other than the games (that requires an add-on purchase).

    My final word on the affect on AMZN: meh.

    Final word on my new toy: Can't wait!

  • Report this Comment On April 04, 2014, at 4:22 PM, tenaciousdeucer wrote:

    The Fire TV seems like an OUYA that might actually work. It looks pretty nice and the specs are good.

    I'll still take a PS3 and it's last-gen console tech for an all-purpose entertainment hub over this thing, though.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2902880, ~/Articles/ArticleHandler.aspx, 10/21/2014 5:23:24 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement