Amazon aims to take control of living room

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Posted: Friday, April 4, 2014 12:00 am

Amazon is a retailer that makes and sells entertainment. This week, it took a big step toward a future in which shopping and video are tightly linked, perhaps even inseparable.

If Amazon has its way, even watching home movies of your sister's adorable children or a friend's crazy cat will become marketing opportunities.

The company began selling a device Wednesday that lets consumers watch Amazon's extensive video library as well as play a wide array of games on their television sets.

“Amazon has a vested interest in making sure it is present at every moment of possible consumption, which is all the time,” said James McQuivey, an analyst with Forrester Research. “It wants to get into that television screen and start to build a relationship.”

Amazon Fire TV is part of a multibillion-dollar effort by Amazon to move from selling goods produced by others, which is traditionally a low-margin business, to presiding over the entire process of creation and consumption.

In books, Amazon has largely made this transition. It makes e-readers and tablets and then sells the content for them. Some writers produce their books exclusively for Amazon, happily living in the digital equivalent of a company town.

Video is much more competitive. Netflix, which began by renting the same DVDs that Amazon was selling, is the leader both in streaming video and creating original shows to feature on it.

“Streaming is the long-term future of video,” said William V. Power, an analyst for Robert W. Baird & Co. “Amazon needs to capitalize on that. The prize is controlling much of the living room and a big piece of the economy.”

Fire TV costs $99. In addition to content from Amazon's own studios, it offers programming the retailer licenses for an estimated 20 million Amazon Prime subscribers. Those customers pay as much as $99 a year for a membership that includes videos and shipping.

Other Fire content will come from established players like Hulu and Netflix. Yet another source will be homemade films. With a separate $40 controller, Fire TV can also be used to play games, including a version of the extremely popular “Minecraft.”

“We're missionaries about inventing and simplifying on behalf of customers,” Peter Larsen, an Amazon vice president, said at a press conference to announce the device.

Larsen said devices from competitors, which include Roku, Google and Apple, have three problems: It is too hard to search for content; performance is slow and unreliable; and the content is a closed system.

Among the improvements and enhancements promoted for Fire TV: a voice search function that allows users to say a name like George Clooney or a genre like horror and see results instantly pop up, and a prediction feature that knows what you want and queues it up.

Since set-top boxes give consumers an incentive to cut the cable cord, Fire TV also puts Amazon in the sights of Comcast, the country's dominant cable system.

Consultants are already laying their bets.

“The likely winners are Apple and Amazon, both of which offer entire ecosystems, are excellent at merchandising content and are capable of subsidizing prices and making up the revenue elsewhere,” said Bill Rosenblatt, president of GiantSteps Media Technology Strategies. “The likely losers are Google, which has a poor track record in entertainment devices and is not very good at merchandising content, and Roku, which has no ecosystem or synergies with other devices or services.”

In Amazon's vision, the television becomes a supercharged home-shopping ecosystem, no matter what happens to be on.

“Imagine,” McQuivey said, “I'm watching a Jason Bourne movie. He's on the run through Europe. The movie pauses and lets you move into an interactive game with Bourne. Or maybe he goes through Vienna, and you always wanted to go there, so here's how you could plan a trip or at least buy a book about it. Amazon will know who to offer these deals to because those people are already in front of it at that moment.”

One small clue to the company's ultimate plans: Amazon is promoting an app for its box from a startup called Magisto. It offers free automatic video-editing software that can reduce the three-hour movie you shot about your cat to something far snappier. The company says it has tens of millions of users, a small percentage of whom choose to make their films public.

Magisto has the potential to be a sort of YouTube for Amazon customers.

“We see a real opportunity to use television as a tool for personal storytelling and personal communications, as opposed to just broadcast communications,” said Reid Genauer, chief marketing officer of Magisto.

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