Just as excitement was ramping up about the coming battle for your streaming dollar with the announcement of Google’s (GOOG,GOOGL) new Chromecast devices, Amazon (AMZN) threw gasoline on the fire by banning sales of media streamers from Google and Apple (AAPL).
Bloomberg was the first to report on a memo from Amazon to its vendors, saying Amazon will stop selling the Chromecast and Apple TV. The online retailer is going further, banning its marketplace vendors from selling the devices and giving notice that all Chromecast and Apple TV listings will be removed from amazon.com by October 29.
Does Amazon Have a Hidden Agenda?
Amazon says its trying to protect its customers, but don’t believe the PR speak. It’s all about pushing Amazon shoppers into buying a Fire TV or Fire TV Stick.
At the time of writing, both the Chromecast and Apple TV sit prominently on the home page of Amazon’s “Best Sellers in Electronics” page. They occupy the number 6 and number 15 spots, respectively, among the 100 most popular gadgets sold by Amazon. Over the 2014 holiday season, the Google Chromecast was topped only by the Fire TV Stick in the media streamer category.
This year, sales of those media streamers are expected to take off. Google’s new Chromecast devices were just announced last week; Apple finally took the wraps off an upgraded, game-playing Apple TV early in September; Amazon announced its own Fire TV upgrades, which include 4K video support, on September 24.
Sales of the little devices doubled in 2014, and with the current crop of hardware are expected to be hot sellers this holiday season. With that surge in popularity and the increase in capability to do more than simply stream video, the tech giants are now squaring off to gain control of the living room as a central component to their smart home strategy.
Having a competing platform make significant gains over the holiday shopping season is, therefore, much more dangerous than simply missing out on some potential video streaming revenue — it has the potential to set back much larger plans.
An Amazon spokesperson told Wired that the move to ban Chromecast and Apple TV was motivated purely by a desire to protect its customers.
“Over the last three years, Prime Video has become an important part of Prime. It’s important that the streaming media players we sell interact well with Prime Video in order to avoid customer confusion.”
However, that explanation doesn’t fully hold water.
It’s true that the Apple TV and Google Chromecast don’t have direct support for Amazon Prime Video (they never have). So, why suddenly trot out that excuse now? As the Wired piece points out, there’s no technical reason why Prime isn’t available. It’s purely a business design between the three companies.
And, plenty of Apple TV users are already streaming Amazon Prime video (albeit indirectly) by downloading the iOS app on their iPad or iPhone, then using AirPlay to push the content to their Apple TV.
Then there are the millions of Amazon customers who are not Amazon Prime members. Even if the lack of native Prime Video availability on the Apple TV and Chromecast was a truly confusing situation, it would have no impact on these shoppers.
The final piece of the puzzle is Roku. This company actually leads the media streamer market and does support Amazon Prime Video, so Amazon is leaving it alone. That’s in keeping with the Prime excuse for the Apple and Google hardware ban.
The Real Scoop Behind Amazon’s Ban
However, here’s what I think is going on.
For Amazon, the goal to sell hardware dovetails with its strategy to get customers signed up for Prime Instant Video. If it loses the hardware battle in the living room and is forced to consider supporting the Apple TV and Chromecast, AMZN faces the unpleasant specter of Apple and Google taking a 30% cut of video rentals and purchases through an app. But, there’s more to it than that.
With the smartphone and tablet markets maturing, tech companies are turning to the connected home as one of the next big markets.
Roku — while a big player in streaming video — has no real designs on anything more. Apple and Google, on the other hand, are positioning their streamers as part of a grand plan to control the home. Google’s Nest division is taking a lead in smart automation, and you can bet Chromecast will eventually integrate into that. The new Apple TV has its own app store, and one of the first apps shown off at the hardware reveal was Gilt, an online shopping tool — that’s not Amazon.
If Google or Apple gain control of the living room, Amazon faces not only being pushed out in terms of video streaming, but its retail customers could also be directed to competing services.
Any other smart home hardware Amazon might be planning (like the Echo speaker) would also risk being stranded if the Fire TV gets buried under the Chromecast/Apple TV crush, because devices supporting a common platform are more likely to succeed than standalone products.
Of course, Amazon’s move risks alienating both customers and vendors, many of whom were undoubtedly looking forward to a holiday rush on these new streamers. But, that’s clearly a risk the company is willing to take in a move to focus buyers on the Fire TV instead.
So, yes, ultimately the move has at least something to do with Amazon Prime Video, but don’t buy the “avoiding customer confusion” excuse. Banning the Chromecast and Apple TV is all about selling more Fire TV units in the next three months and hoping that it’s Amazon that rules your living room when the dust settles.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
