Amazon's Fire TV Means Trouble for Sony and Microsoft
Amazon.com rolled out the Fire TV earlier this month. Some critics have already written off the streaming media player's chances of becoming a viable gaming platform, arguing the device can't hold a candle to Sony's PlayStation 4 and Microsoft's Xbox One.
But all signs point to Fire TV as a dependable gaming platform. Its cheap price and future prospects, together with Amazon's dedication to creating games, will ensure that Fire TV becomes a competitor to the PlayStation 4 and Xbox One.
The price angle
Amazon's full-year 2013 operating income of $745 million was 10% higher than 2012's $676 million. The company's revenue was driven, at least in part, by undercutting rivals, and it is keeping to that strategy with the Fire TV. At $99 (plus $39 for the controller), the device is much less expensive than the PlayStation 4 ($399) and Xbox One ($499). Meanwhile, Gartner says the worldwide video game marketplace will reach $111 billion by 2015, up from $79 billion in 2012, which means the Fire TV has an opportunity to exploit a rapidly growing market.
Amazon forecasts sales of $18.2 billion to $19.9 billion in the first quarter. Amazon's statement that the Fire TV is not just a gaming console is a very important one. Phones, smart televisions, and video streaming devices are becoming important in the gaming sector. Analysts say Fire TV gives users a viable option for playing mobile games on a television. This could allow Amazon steal away some of the console audience. Gartner says the video game console market will reach $55 billion in 2015. Since Amazon has the elements necessary to provide a basic gaming experience, it could court consumers away from dedicated console offerings.
Amazon and game developers
Game titles drive sales. In addition to improving its hardware, Amazon wants to produce quality game exclusives. Consequently, the company has been working with video game developers after the acquisition of Double Helix Games. According to Cisco, global online video users are expected to grow from 1.1 billion in 2012 to nearly 2 billion by 2017. Needless to say, if Amazon has many developers with strong titles in its network, it should be able to tip many future users in its direction.
Sony's games business recorded sales of $4.35 billion in the third quarter of fiscal 2013. The launch of the PlayStation 4 was responsible for a significant proportion of those sales. Sony also recently partnered with NASA to develop new virtual reality technology for the product. Because of initiatives like these, DFC Intelligence forecasts that PlayStation 4 could hit 100 million units sold by 2020.
In the second quarter of fiscal 2014, Microsoft sold 7.4 million units of its Xbox title. Due to the rise in sales of Xbox and other products, Microsoft announced revenue of $24.52 billion, up from $21.5 billion for the second quarter of the 2013 full-year. Microsoft is partnering with British TV network Channel 4 to sustain the momentum of Xbox One sales. The arrangement will lead to the production of an eight-episode series about humanoid robot workers to increase sales. Gartner predicts that sales of existing console hardware will rise from $15.9 billion in 2013 to $22.7 billion in 2015.
In the fourth quarter, Amazon's posted net income of $239 million, compared with $97 million in the same quarter a year earlier. Fire TV's cheap price, future prospects, and incoming games will guarantee sales. These qualities will also enable the product to compete with the PlayStation 4 and Xbox One, and help boost Amazon's business.
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The article Amazon's Fire TV Means Trouble for Sony and Microsoft originally appeared on Fool.com.Mark Girland has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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