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  • The “Products to Compete With” Report

    October 28th, 2014

    So there are reports this week that Amazon, stung by the abject failure of the costly Fire Phone, is back to selling cheap. There is now the low-end $39 Fire TV Stick, yet another TV streaming appliance that’s designed to compete with the Google Chromecast. It’s marketed directly against the Chromecast with the claim of having four times the storage and twice the memory.

    To boost initial demand and sales, Amazon Prime members, who pay $99 per year and up for free two-day shipping on many products and free Amazon Prime Instant Video streaming, get a $20 discount. Well, at least through Wednesday. I suppose in the scheme of things spending $19 on a small electronic gadget might be a pretty casual purchase.

    Of course, Amazon is not earning any profit on that little gadget. At the $19 discounted price, it’s a loss, but Amazon hopes you’ll decide to move beyond the free video library, and take a look at a larger repertoire of movies and TV content from a number of services, including Netflix. When Amazon factors in their piece of the online action, perhaps there’s some profit to be made.

    Now I do not choose to review a product I haven’t used. But this is a market already addressed with the Chromecast and the $49.99 Roku Streaming Stick. For almost $11 more, Roku promises access to over 1,000 channels. But assume for the moment that all three devices offer fairly decent video performance on your HD TV, with decently snappy and fluid user interfaces. How do you choose one or the other?

    I suppose if you’re already invested in the Amazon ecosystem, you’d do better with a Fire TV Stick. Faced with mounting losses, that might have been Amazon’s intent, to boost cash flow with minimal losses to move as many Fire TV Sticks as possible. After all, they don’t really cost a whole lot to build.

    But when a tech company comes up with something to compete with an existing product, it’s very rarely better in significant ways. Most of the time, a spec or two is better, but overall functionality and usability isn’t altogether different. So the choice from the customer may come down to price, commitment to a specific platform or, most often, the famous “Eeny Meeny” test to make a final choice.

    Sure, there’s nothing wrong with just coming out with an imitation of someone else’s tech gadget, and maybe selling it at a lower price. Samsung has managed to do quite well taking that approach, although the copying of the iPhone and the iPad was rather more blatant and Apple didn’t sit still. All right, the lawsuits didn’t stop Samsung from selling anything, and it does seem as if they are cutting back on the tit-for-tat legal filings.

    Now notice that the media doesn’t seem to be calling the Fire TV Stick a Chromecast or Roku Streaming Stick killer. It’s just designed to be a rival product. But when it comes to Apple, the speculation is invariably about how an iPhone or an iPad will suffer at the hands of the “killer” of the day.

    I suspect few really care of the Fire TV Stick beats a Chromecast in the marketplace, as if that’s a market to be envied.

    In another business, you don’t expect the Ford Fusion to “kill” a Chevy Malibu. Both are mid-sized or family cars, priced in a similar range, with similar seating capacity and relatively minor performance and handling differences. Well, I suppose some car magazines will tell you why one or the other is much better in one or more respects, but both products can coexist in the same universe, in dealerships that might be across a driveway from one another. There will be staunch advocates of one brand or the other, but the media won’t be telling you that Chevrolet will go out of business tomorrow because of the existence of a competing auto from Ford or any of a dozen other manufacturers.

    In the Apple universe, the company produces a small number of products, usually available in a small number of configurations. True, Macs can be customized, but the real variety is primarily at the higher end, with the Mac Pro. All right, there may be too many iPads available right now, and maybe Apple is stretching things a tad to see how it shakes out.

    But the overall approach of simplified product lines affords each a higher stake. So when a competing product arrives, it’s easy to regard it all as a battle to the death. But that’s Apple. Even though Samsung sells more Galaxy handsets than HTC Ones, one doesn’t exactly destroy the other in any meaningful comparison. Certainly a Dell doesn’t kill the competing HP or Lenovo.

    In any case, I’m a long-time Amazon customer. If I was in need of a video streaming appliance, I might even consider a Fire TV Stick. But I’m not. Certainly a fair amount of similar gadgets have been sold, although 20 million copies of the Apple TV and 10 million Rokus don’t really indicate a significant trend. This is still a market ripe for innovation. But real innovation is not Amazon’s game plan.



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    2 Responses to “The “Products to Compete With” Report”

    1. DaveD says:

      Wow, another cheap TV streaming stick. My question for Amazon is “Why?”

      Their stockholders are finally waking up and saying “Show me the money.”

      Microsoft unlike Amazon has software to provide the easy money. Microsoft had in the past invest in producing an operation system and software. Then it can sit back and make money of the copies with little additional cost of production for years. The bloat from software money can hide losses in the hardware side of the company. However, Microsoft’s years of easy money may be slowly fading away.

      Amazon being primarily a seller of others’ stuff is trying really hard to make stuff. However, making imitations in the sea of iPhone/iPad wannabes will eventually get swept away. No one wanted the Fire phone. While there is a strong support for the Kindle, it can’t be a growing market. Too much cheap imitations floating around.

    2. Woochifer says:

      The streaming TV market is fragmenting before our very eyes. Amazon throwing another streaming stick into pile just provides further evidence of that happening.

      No single streaming option out there offers up a comprehensive selection of programming that combines live broadcast, the most popular TV programs on-demand. and new release and library titles from all the major studios. And all the existing options provide a little bit of something here, and something else there. But, no single option groups the majority of the most watched programming together under one umbrella.

      The streaming market’s well on its way to a situation similar to the premium cable channels (e.g., HBO, Showtime, Starz, etc.), where each broadcaster carves out exclusive access to recent release programming from certain providers/studios and differentiates themselves with original programming. Because of rising programming costs, Netflix has been paring back the size of their program offerings, while ramping up their own original programs.

      This is an opportunity for Apple, because they very well might be the only player that can effectively merge broadcast, on-demand, and digital download programming. They have the existing relationships with providers and content delivery infrastructure. When Steve Jobs said that they’d solved the puzzle with TV, I would guess that they have the platform and only need the content. A lot of the other players in streaming TV also think they have the platform, but I think only Apple has the clout to herd together the content and be able to offer up the content in a compelling way that’s simple and with one-stop billing. That’s really the holy grail that none of the other streaming TV players can or will offer up.

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