Seven-Pound Scissors

Amazon Makes Cord Cutting Cheaper than Ever

Amazon_Fire_TV_stick_lOn 24 March, Amazon announced that its Fire TV Stick — an HDMI dongle that enables Wi-Fi streaming — would go on sale in Austria, Germany and the UK. In addition, the company unveiled a software update for the Fire TV Stick and Amazon’s Fire TV streaming media box. Among the new features enabled by the update are the ability to expand storage on the Fire TV box, to access expertly-created playlists and to use Fire TV and the Fire TV Stick at locations that require Web authentication, like hotels.

Pre-orders of the Fire TV Stick will begin immediately in Germany and the UK, and the product will begin shipping in mid-April.

The dongle is usually £35 in the UK, but Prime subscribers are being offered it at a promotional price of £19. Further rebates take the device down to an extremely competitive £7 — Google’s Chromecast HDMI dongle, for example, retails for £30 in the UK. In side-by-side comparisons, Amazon highlights that its Fire TV Stick has two processing cores versus Chromecast’s single core, four times the storage (at 8GB), twice the RAM (at 1GB) and includes a hardware remote control.

Amazon is making sharp moves to build a base of customers at a time when a surge of competing streaming services and devices are coming to market, including products from Apple and Sony.

However, Amazon’s Prime video streaming service has limited geographical availability. Its roll-out in Austria, Germany and the UK is likely a start to a broader-access strategy, but CCS Insight believes Amazon will need to work with content partners to accelerate the roll-out before competitors including local incumbent broadcasters can prevent Amazon from gaining further traction. Netflix, for example, is a current Amazon partner and is spreading quickly across Europe and Latin America. Amazon will need the additional scale to support its growing franchise of high-profile proprietary content.

Amazon’s current near-risk-free hardware pricing could make cord cutting more tempting for households, accelerating changes to the traditional broadcast market. However, CCS Insight believes that win-win partnerships are possible, whereby Amazon could work with local telecom providers to enable a means to expand their content and renovate their distribution infrastructure. But the likes of Amazon are creating greater consumer choice and require no multiyear contract obligations. An increased level of flexibility and customisation options will continue to dilute the pricing power of operators and cause significant disruption to a classic business model.

This means a particular disruptive threat to classic set-top box makers supplying hardware directly to cable and satellite broadcasters, who in turn often charge monthly rental fees to subscribers. CCS Insight has predicted several times that the set-top box will evolve in the coming years to become a virtual device based more on software and cloud services than its current physical form.

Amazon isn’t driving innovation here, but has a fast-follower strategy of beating established hardware specs and pricing. Amazon is fast enough to counter moves by Apple, Dish, Google, Sony and other hardware and service providers, but needs a larger global footprint. HDMI ports on modern television sets are becoming valuable slots of real estate, allowing the boxes to become expandable computers that grow with technology. More low-cost dongles are headed to the market, making it easier for consumers to test living-room streaming. If they like it, there will be no going back.

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