Word on the street is that Amazon is developing a Kindle TV set-top box comparable to a Roku or an Apple TV or the non-gaming features of an XBox or a PS3. If the box reflects Amazon's general business principles, it's bad news for the other players in this field.
Basically unless Amazon has a radical change of philosophy they would want to sell a box like this at cost. At the main customers for it would be existing Amazon Prime members, who would use the box to access the large library of free streaming video available to Prime members. The attraction to Amazon would then be that it serves as an access point for additional sales of digital content through Amazon and for the sale of additional Prime memberships. Why sell Prime memberships? Well, because the more Prime members you have the more people who'll turn to Amazon for delivery of the broad set of basics—toilet paper, toothpaste—and not just sporadic large-scale purchases.
Where do you make the money in this? Well it's not clear. That's the terrifying part about competing with Amazon and the joy of being an Amazon customer. As we've seen time and again, Jeff Bezos has persuaded Wall Street to back a strategy of "growth now profit later" that has no obvious endpoint.
In some markets, Amazon's competitors still have a decisive quality edge. The Kindle Fire line of tablets are interesting, but even though they're cheap they feel cheap to use. But I'm not sure that things like build quality matter for set-top boxes the way that they do with phones and tablets. The Apple TV is a very elegant piece of industrial design, but it's also a little box that sits on your shelf not something you pick up and handle. Even if Kindle TV can't quite match it, a combination of good price and good accesses to aggressively priced digital content seems like a winning strategy.
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