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Man watching television holding the remoteAmazon’s Prime service is a substantial revenue source for the company. To encourage even greater adoption of the $79 annual membership, Amazon needs to make sure that the benefits it offers remain salient and appealing to consumers. Along those lines, the most recent rumors out of Seattle suggest that Amazon will introduce a television set-top box that will allow Prime subscribers to stream their Amazon Instant Video service directly into their living rooms, on their big screen televisions.

Although no one at Amazon has confirmed these rumors, that has not stopped commentators from gleaning pieces of information and speculating about the potential functionalities and impacts of such a box. The small devices reportedly would not only facilitate streaming of Amazon content but also allow users to download and interact with other apps through their televisions. The streaming services could enhance Amazon’s competitive positive relative to Netflix while also reducing its dependence on external hardware, such as Microsoft’s Xbox, to support consumers’ access to its own content.

Other competitive offerings already exist, such as Roku’s devices and Apple TV, as well as the expanding smart TV options. Although Amazon can be accessed through these competitors, that option prevents the marketing genius from gaining direct access to users. Thus, Amazon currently is losing a key opportunity to learn more about its customers’ viewing habits and preferences.

The anticipated device also would interact closely with Amazon’s Kindle. For example, content downloaded onto a Kindle might become immediately available on the television, and vice versa. A Kindle app also could enable the device to serve as a remote control for the set-top box, eliminating the need for customers to keep track of yet another remote.

For both this potential device and other rumored introductions by Amazon (e.g., an audio streaming device, new smartphones), the pricing will likely follow Amazon’s existing pattern: Price the hardware at close to the production cost, then make money through selling services through that device. But for now, all these options remain speculation.

Source: Greg Bensinger, “Amazon Readies Set-Top Box for Holidays,” The Wall Street Journal, October 3, 2013