In its first day of pre-release, the Amazon.com (NASDAQ:AMZN) Fire TV Stick immediately moved to the top of the company's "Best Sellers In Electronics" list. More importantly, the streaming television device passed the previous chart-topper, Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) Chromecast.
Fire TV Stick was clearly designed as an answer to Chromecast, Google's streaming media player which recently was selling for under $30 on Amazon though it has a list retail price of $35. The Fire TV Stick is priced at $39. Chromecast has been a top-seller since its July 2013 release and that's certainly a mixed blessing for Amazon.
On one hand the company made a sale, but on the other (the much more important and larger hand) the company had lost a customer for its own Fire TV set-top box which launched in April 2014. Every lost customer meant one more household essentially allowing Google to set up a storefront in its living room instead of Amazon. Ultimately, that choice could lead to customers leaving Amazon as Google rolls out its Shopping Express service across the country. Selling that same customer a Fire TV or a Fire TV Stick not only gives Amazon that virtual storefront, it also increases the value of Amazon's Prime services since it provides a way for people to watch the included Prime Instant Video on a TV.
If Fire TV was an answer to Apple's (NASDAQ:AAPL) Apple TV set-top-box and Roku's streaming players, then Fire TV Stick is a definitive answer to Chromecast -- a me-too product that makes a lot more sense for Amazon Prime users to buy than Google's offering. Clearly, Amazon wants Prime users to buy the product as it was offered to them for $19 during the first two days of pre-release. That makes sense, because as I wrote about in "Amazon Prime Members Spend Almost Twice as Much as Non-Members" Prime subscribers spend almost $538 a year versus the $320 per year spent by non-subscribers, according to a study conducted by RBC.
Keeping those customers from defecting to Google (or to a lesser extent Apple or Roku) is absolutely key for Amazon.
Fire TV Stick is already better than Chromecast
When Chromecast was released, I bought one largely due to the price point. I found the lack of a remote frustrating. Yes, you can control the device from a computer or a smartphone, but I don't really want to watch TV while holding my phone or sitting with a laptop on my lap.
Chromecast was fine, but I dropped it for Fire TV, which I ordered when it was announced. The Amazon box had a better selection of apps, built-in games, and easy access to Prime Instant Video. It's also just easier to use and the simple remote control is vastly superior to using a phone or computer. Amazon has promised to deliver a similar experience on Fire TV Stick minus the built-in voice controls Fire TV offers. Those controls can be accessed, but only through the free Fire TV app, which requires using a phone or computer.
Amazon CEO Jeff Bezos seemed pretty thrilled in the press release touting the launch.
"Fire TV Stick is the most powerful streaming media stick available -- a dual-core processor, 1 GB of RAM, 8 GB of storage, dual-band and dual-antenna Wi-Fi, included remote control, voice search with our free mobile app, easy setup, an open ecosystem, and exclusive features like ASAP for instant streaming," Bezos said.
That's the typical hyperbole any CEO offers when releasing a new product, but in this case, Amazon knows what it's doing. The company can clearly see that Google has created a massively popular product largely based on price point and it can steal a lot of that business by releasing a better take on the same device at a similar cost. Just the inclusion of the remote alone makes Fire TV superior, even if you consider the interfaces of both units similar enough to not matter.
Amazon has a winner here
Because it's a retailer on a massive scale Amazon knows what sells. The company, much like a supermarket chain, has the ability to take a popular item and make a house brand in order to cut out the vendor. In this case, Amazon can knock off the Chromecast and not only cut Google out of the sale but steal all the long-term benefits of having a customer using its streaming video player.
Fire TV Stick may not be a Chromecast killer, but it turned what was once a pretty unique device into a clear second choice offering. Google may have created the category but Amazon has stolen it out from under the search giant.
Daniel Kline owns shares of Apple. The Motley Fool recommends Amazon.com, Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Amazon.com, Apple, Google (A shares), and Google (C shares). 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.