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Will Amazon Introduce a Roku and Chromecast Competitor That Can Stream Video Games?

By Daniel B. Kline - Mar 23, 2014 at 8:20AM

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The giant online retailer is reported to be entering the crowded space, but with a device that's a little bit streaming player and a little bit gaming console.

The market for streaming video players for televisions has become crowded.

Roku has its signature boxes, Google ( GOOGL 0.62% ) has its tiny, cheap plug-in Chromecast device, Apple ( AAPL 2.28% ) offers Apple TV, and countless TVs have the most popular streaming apps built-in. Of course Microsoft's ( MSFT 0.01% ) Xbox line and Sony's ( SONY 0.95% ) PlayStations also offer access to various streaming video apps on your TV, as do a number of smart TVs and Blu-ray players.

Amazon.com's ( AMZN -0.00% ) decision to enter the market and compete with all of the above players would be minor news if the online retailer wasn't offering something more than yet another way to watch Netflix (NASDAQ: NFLX) on your flat-screen. That may be the case as a number of leading technology websites have posted credible evidence that the Amazon streaming player -- which ships in April, according to the Wall Street Journal -- would also be a gaming device.

The evidence for an Amazon TV-connected gaming device mounts

Amazon obviously wants a piece of the growing streaming player market because it gives the company access to customers' living rooms. There are huge benefits to Amazon being on customers' TVs -- everything from an increased ability to sell products to encouraging people to sign up for Amazon Prime in order to use its free Prime Video service. Adding gaming to the device in a way that straddles the line between PC games, console games, and casual games (the ones played on phones and tablets) offers some intriguing possibilities.

Reports of exactly what the device will do vary, but here's a look at some of what is being reported.

  • TechCrunch: "One source claims it should have support for streaming full PC game titles, and as such might be able to compete with consoles including the Xbox and PlayStation, instead of just Android-powered living room game devices.
  • CNN Money: "Recent photos unearthed by the online TV-centric blog Zatz Not Funny! also indicate Amazon has been working on a gaming controller."
  • VG247: "Retail giant Amazon will launch a dedicated games and entertainment device this year priced below $300. Running the Android operating system, the system will compete directly with Sony, Microsoft and Nintendo, offering the streaming and download of games, music, movies, and TV content, multiple sources have told VG247."

There are countless more reports -- a lot of smoke for there not to be a fire. Whether Amazon plans a Chromecase-style device with the ability to play tablet/phone style games or plans a full-on Xbox/PlayStation competitor remains to be seen.

Amazon could keep device prices low

Google already set a bottom for the streaming video player market with its $35 Chromecast. That device caused Roku to introduce a player with a similar profile that will sell for $50. Apple TV goes for $99 -- but Apple has always been able to charge more for its devices likely due to the perception (and sometimes reality) that they are better than their competitors' offerings.

Realistically none of the players in this space are making much if anything selling hardware. The same is true for game consoles, where Microsoft's Xbox One, which retails for $499 (but comes with a Kinect motion sensor) and Sony's PlayStation 4, which sells for $399, are money-losing propositions. VentureBeat.com estimates that the Xbox One costs about $471 to make, compared to $381 for the PS4. Those are solid losers once you consider that retailers get a cut. But Sony and Microsoft aren't selling devices to make money. They are selling them to peddle games and profit from the other sales opportunities offered by having a console in someone's house.

Amazon has a stated policy of selling devices at break-even.

"Our business approach is to sell premium hardware at roughly break-even prices. We want to make money when people use our devices – not when people buy our devices. We think this aligns us better with customers," CEO Jeff Bezos wrote in the company's 2012 annual report .

While pure streaming player prices really can't fall any further if the Amazon device offers the ability to play games that rival those on Xbox One and PlayStation 4, it could certainly put pricing pressure on Microsoft and Sony.

The market for Amazon could be huge

Amazon does not release how many registered users it has nor does it report how many Kindles it has sold. The company did however report 2013 sales of $74.45 billion, which suggests an enormous customer base. The company has shown a willingness to enter already crowded markets (as it did with its Kindle Fire tablets) and find ways to innovate/leverage its relationship with its loyal customers to gain significant market share.

The prospect of an Amazon streaming video player may excite people already tied into the Amazon ecosystem but it's doubtful they would switch from another installed device they are already happy with. If that player offers a high-end gaming experience -- even if it falls short of what Xbox One and PS 4 offer -- it might bring in new customers. If the price for the device comes in under $300, it could be a powerful rival to the gaming consoles. If it comes in sub-$100, it could be a game-changer affecting sales for Roku, Apple TV, and even Chromecast as well. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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