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April 3, 2014

Amazon introduces Fire TV to challenge Apple in living rooms

SAN FRANCISCO — Amazon.com Chief Executive Officer Jeff Bezos is stepping up efforts to win over customers in their living rooms with a $99 TV box for watching digitally delivered shows and movies, challenging Apple's TV device.

The world's largest Internet retailer unveiled Fire TV, a small black device that starts shipping Wednesday. The machine also puts Amazon in closer competition with Google and Roku, which offer their own Internet-connected TV gadgets.

All of the companies are striving to reach into consumers' homes and to tie customers to a package of services. Amazon has been using free video-streaming to lure more people to its two- day shipping subscription, called Prime. Fire TV includes , Netflix Inc. and Hulu Inc. applications for viewing, part of Amazon's effort to include as much content as possible, according to Peter Larsen, vice president of Amazon's Kindle division.

"Fire TV is definitely a better experience if you have Prime," Larsen said in a brief interview after presenting the device at an event in New York.

Fire TV also features viewing apps from Walt Disney Co.'s ESPN and CBS Corp.'s Showtime, available to anyone who already pays for television through their cable or satellite provider. Bloomberg TV, part of Bloomberg LP, is also featured on Fire TV.

Amazon, which had already offered streaming-video services via its Kindle tablets and Web browsers, also competes with Netflix and Hulu for content rights from major television and film studios.

Amazon's TV strategy isn't designed to compete with traditional TV services and is aimed instead at helping the Web retailer sell more products. Fire TV should help drive more Prime subscriptions, Larsen said. The service, which costs $99 a year, offers free 2-day shipping and includes with a wealth of streaming video content from major TV studios.

"This is about selling Prime," said Michael Pachter, an analyst at Wedbush Securities Inc. in Los Angeles. "It really does open up their ability to deliver a lot of stuff."

Prime members are typically among the company's most active online shoppers, said Pachter, who has the equivalent of a hold rating on the stock.

Amazon said it has at least 20 million Prime subscribers worldwide and is working to add more video content onto Fire TV, including those from cable companies.

Comcast Corp., for example, has its own viewing app that's available on Apple tablets and smartphones. The cable company also has embarked upon its own a digital TV strategy, releasing a cloud-based set-top box called X-1 to millions of its customers. Discussions with cable companies aren't happening yet, Larsen said.

With its own box, Amazon can feature its library of video instead of depending on other TV manufacturers. Like Netflix, which produces shows such as "House of Cards," Amazon has been developing programming to attract customers with exclusive content.

"Nobody else has a critical mass of content outside of Netflix," Pachter said. Amazon's library includes exclusive rights to shows such as "Downton Abbey" and "Jersey Shore."

Amazon gave Fire TV some features to set it apart from the competition. The device has thousands of games from top developers such as Electronic Arts Inc. It also includes an interface with Amazon's Internet Movie Database site so viewers can get more information about the shows they're watching.

Bezos is pushing Amazon further into the manufacturing of hardware, including tablet computers, e-readers and package- delivering drones. A TV device provides a new platform for software developers to build games and other applications for the various digital devices.

The television products from Amazon and others have largely served as a supplement to cable-television services instead of replacing them. The services don't offer much live programming such as sports and are mainly an entry point for accessing catalogs of movies and TV shows for viewing on demand.

While Apple's TV product provides access to videos from iTunes, Hulu, YouTube and others, Amazon video isn't available. Google's TV product, called Chromecast, was introduced last year and costs $35. Others competing in the market include Microsoft, with its Xbox game system, and Roku.

"This is their attack on Roku and Apple TV," said Brian Blair, an analyst at Wedge Partners.

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