Why Kindle Fire TV will help Amazon expand its customer base

Market Realist

Amazon ups its hardware business with a smartphone and set-top box (Part 2 of 4)

(Continued from Part 1)

Amazon launches Kindle Fire TV for $99

Over the last few years, Amazon has launched a few hardware products at attractive prices. In November 2007, it launched Kindle, an e-book reader, while in September 2011, it launched the Kindle Fire tablet. Amazon launched the enhanced version of the tablet, called Kindle Fire HD, in September 2012, and then the third-generation tablet Kindle Fire HDX in September 2013. Recently, Amazon announced the launch of Kindle Fire TV, a set-top box to compete with Apple (AAPL) TV and Google (GOOG) Chromecast devices at an attractive price of $99.

Amazon’s looking to revive revenue growth through new devices

Amazon’s strategy has always been to offer hardware products at a lower price so as to acquire customers and then sell services to those customers. The company’s revenue growth from its services segment has been more than double compared to its revenue growth from its product segment, as the above chart shows. However, over the years, Amazon has experienced slowing revenue growth both in its product sales and services sales. To revive this growth, Amazon is looking to expand its portfolio of products by entering the new markets.

The Kindle Fire TV has advanced features

The Kindle Fire TV is primarily a video streaming product from Amazon to stream videos from content providers such as Netflix (NFLX), YouTube, and Hulu. It also comes with access to Amazon’s own Instant Video service and access to music service from Amazon MP3, Pandora (P), and TuneIn. The device also has a voice search feature and comes with 2 GB of memory access, which is four times the memory provided by Apple TV.

Fire TV will also act as a platform for developers to develop Android mobile apps and games. According to Mike George, vice president of Amazon Appstore and games, “Developers are already finding monetization success with the apps they offer for Kindle Fire and in the Amazon Appstore. Fire TV is the newest reason for developers to bring their apps and games to the Amazon platform. Fire TV is an opportunity for a broad group of developers—whether it’s existing Android developers or those focused on console, or PC development—to reach into the living room and engage a whole new set of customers who love entertainment. We already have many great developers on board like 2K, AOL, Bloomberg, Clear Channel, Disney, EA, ESPN, Gameloft, Hulu, Mojang, Pandora, SEGA, SHOWTIME, Telltale, Ubisoft, and Vevo—and with today’s announcement we expect many more to join.”

Continue to Part 3

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