Amazon Fire TV Stumbles Ahead of the Holidays (AMZN)

Amazon (AMZN) rolled out its new Fire TV video streamer (and gaming box) in September, in the opening salvo of a holiday battle for consumer living rooms.

Amazon Fire TV, crisis for AMZN
Source: Amazon

There’s a big problem for AMZN, though. Despite the new streamer’s advantages of 4K video support, an established game library and low cost, the Amazon Fire TV has been plagued with technical glitches.

Ratings are much lower than for the previous generation model and the Amazon Fire TV’s product page is being flooded with negative customer reviews.

Reports have the company in an all-out effort to fix the Fire TV before more PR damage is done and rivals are able to leverage the troubled launch to win the holiday streamer battle.

Amazon Is Skating on Thin Ice

Streaming media devices are becoming hot sellers and as the market has taken off, competition has increased.

Apple (AAPL) and Roku once dominated, but as a connected TV became part of a larger plan — including smart homes and delivery of paid video content — Amazon and Alphabet’s (GOOG, GOOGL) Google released their own streaming devices. Last year, Amazon’s Fire TV overtook the Apple TV in U.S. sales for third place behind Roku and Google Chromecast.

With only 20% of U.S. homes currently owning a media streamer and sales forecast to grow to 86 million of the devices globally in 2019, the stage is set for a battle to own the living room. This holiday shopping season is expected to be a crucial one, setting the tone for who is ultimately going to come out on top. The newest Chromecast and Apple’s long-awaited fourth generation Apple TV will be duking it out with the new Amazon Fire TV in the lead-up to Christmas.

Amazon in particular has gone to great lengths to increase its odds, not content to rely on momentum. Besides being first out the gate with new hardware, offering 4K support and significantly undercutting the Apple TV on price, AMZN undertook the aggressive (and risky) move of banning sales of the Chromecast and Apple TV on its website — including through its third party sellers.

However, it was clear soon after the new Amazon Fire TV went on sale that there were problems with the device. Customers complained that Dolby 5.1 audio wasn’t working on Hulu and Netflix (NFLX) content.

The vaunted 4K video playback seemed to lose focus and stutter. Fire TVs are reportedly freezing and crashing, Wi-Fi has been problematic for some, remotes are disconnecting and voice search — now featuring Amazon’s Alexa AI — hasn’t lived up to expectations.

Trusted Reviews posted what seems to be an all-too typical experience with the new Fire TV, complaining of it being “incredibly temperamental and glitchy” and finally recommending not buying the Amazon Fire TV, which is “in desperate need of a major software update.”

According to AFTnews (a website dedicated to all things Amazon Fire TV), AMZN is in full crisis mode and has a team of 500 employees who have Fire TVs at home for nightly testing the software patches the Fire TV development team is working on. The site goes on to speculate that the root cause of the problems were an “abbreviated schedule and a relaxation of quality standards.”

Whatever the cause, dropping the ball so spectacularly has bitten Amazon in a big way. Any early release advantage the second-generation Amazon Fire TV had over the new Chromecast and Apple TV has been squandered. Both the Fire TV and Fire TV Gaming Edition have been sold out lately — although speculation is they were yanked due to the poor reception– with expecting new stock on Nov. 7.

In addition, Amazon has a PR nightmare on its hands. At the time of writing, one quarter of Fire TV ratings were one-star, with 38% at two-stars or lower. Customers have been very vocal with their disappointment.

The good news for AMZN (if there is any good news to be found in this mess) is that the problems seem to be software-based. A patch has been released to address Netflix audio issues, with Amazon committing to a fix by Nov. 30 for Dolby Digital sound.

With a concerted development push, the company might yet be able to turn the new Amazon Fire TV around, but it has certainly stumbled into what is shaping up to be a crucial holiday shopping season.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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