Amazon.com ( AMZN -1.53% ) is reportedly planning to debut a set-top box later this month, according to Re/code. The device will likely compete with Apple's ( AAPL 3.16% ) own Apple TV, but could also put pressure on traditional video game consoles, including Microsoft's ( MSFT -1.79% ) Xbox One.
Assuming it's priced aggressively, Amazon's new box should help the company expand its growing digital business and put pressure on its rivals.
Amazon needs a set-top box
Amazon's move into hardware, including its long-rumored set-top box, is somewhat of a defensive play: Without offering its own hardware, it's possible that Amazon could eventually be forced out of the digital goods space.
Amazon, for example, rents and sells digital copies of movies through its Amazon Instant Video service. While this service is accessible on a number of Internet-connected set-top boxes, including Roku's various streaming devices and Microsoft's Xbox video game console, it can't be accessed through Apple TV.
Amazon Instant Video competes directly with Apple's own iTunes video service, making it unlikely that Apple would add Amazon's service to its set-top box anytime soon. The same was once true for Google's competing Chromecast, although last month, Google opened up the device to third-party apps.
Still, as both Apple and Google are expected to push further into the Internet-connected TV space, Amazon needs its own device to stay relevant.
One killer feature that could put Amazon's box ahead of the pack
But with a flurry of boxes already on the market, and more expected to arrive in the coming months, Amazon's device could get lost in the shuffle. Like its Kindle Fire tablets, Amazon will likely attempt to compete by undercutting its competitors, but it could also offer something far more substantial.
Last year, Game Informer reported that Amazon was working on a video game console, one that could double as a set-top box. Then last month, TechCrunch reported that Amazon had acquired Double Helix games, the video game studio that developed Killer Instinct for Microsoft's Xbox One.
It seems likely that Amazon's forthcoming device will double as a video game console, offering owners the ability to play games and stream Internet video. Apple TV (at least for now) isn't capable of playing video games; Microsoft's Xbox One plays games and streams video, but retails for $500 -- likely much more than what Amazon will charge for its forthcoming box.
The ecosystem enters the living room
Fueled by the growing number of iOS devices, Apple's iTunes revenue has ballooned to enormous proportions in recent months, and now grosses roughly $7 billion per quarter -- a combination of music, movies, and app sales have given Apple a rapidly growing digital goods business.
Amazon's move into the living room should prevent it from being shut out of the market entirely, and might allow it to steal some revenue from Apple, particularly as the iPhone maker continues to emphasize its TV business. It could also put pressure on video game consoles, including Microsoft's Xbox.
It remains to be seen what Amazon will unveil, but investors should view Amazon's push into the living room as a positive, and expect something much more substantial than just a Roku or Apple TV clone.