Rumors have been circulating for over a year that Amazon, in its Lab126 subsidiary, is working on an Android-powered device designed to plug into your TV. In other words, a console. These rumors have been given additional life with Amazon's purchase of Double Helix Games, a long-time console game developer. Just today, a fresh rumor asserts Amazon will launch ia console in March. Why would Amazon buy a console game developer unless they were creating their own console?
Really, there's no logical reason for Amazon to buy a console game developer aside from needing in-house resource to create games for a new console. Double Helix Games has no experience building games for Android tablets, which is the other hardware segment Amazon is currently in. Developing games for consoles from Microsoft or Sony (Double Helix's expertise) seems like an unnecessary distraction for Amazon; after all, they already sell games for those consoles from every publisher.
What does make sense is for Amazon to have a presence in the family room on the big screen, and for that market games are a necessary part of the development effort. Look at Amazon's history in hardware – the company got into the Android tablet market a couple of years ago. There was already plenty of tablet competition, and Amazon not only sold all the different tablets but provided its services (like the Kindle Reader, and later streaming video) on those devices. Yet Amazon entered the market with its own tablet, the Kindle Fire. That tablet (and its successors, the Kindle Fire HD and Kindle Fire HDX) have sold extremely well, capturing a substantial part of the market. Amazon won't release figures, but some analysts say Amazon may have a 20 percent share in North America or more.
Amazon got into the tablet hardware business not to make money on the hardware itself (its tablets are priced barely above manufacturing costs), but to control the platform and the experience. If you're reading a Kindle book on someone else's tablet, or viewing an Amazon-purchased movie, you're not giving Amazon its best chance to sell you other products. On a Kindle Fire, Amazon can make you plenty of offers for other merchandise, and thus increase its profits substantially. Plus it doesn't give up 30 percent of the sale price to Apple.
Moreover, Amazon realized that people were shifting their web viewing, and their shopping habits, to tablets in big numbers. Amazon wants to be where shopping happens, for physical goods as well as digital goods.
The same logic applies to the TV screen in the family room. People spend a lot of time there, and web viewing is quickly becoming commonplace on the big screen. An increasing percentage of TVs are smart TVs that include web viewing. Streaming video is now the most common use, timewise, for video game consoles. Apple is clearly going to open up Apple TV as an app platform someday, and perhaps compete directly with Netflix. Amazon doesn't want to let all of these other companies control a major portion of the audience's experience.
Amazon is creating its own console so that it can control the experience and the platform, and offer shopping to customers on the big screen. Using the strategy Amazon employed with tablets, you can expect an Amazon console to be at the low end of the price scale, probably near its manufacturing cost. Amazon would want to see as many people as possible using its console, and a low price is crucial for that to happen. Look for a $99 retail price, or perhaps even a $79 price.
As for the hardware itself, Amazon will likely go with Android internals because of the low price and its familiarity with the the OS and hardware. We'll probably see something like a Kindle Fire HDX internally: Qualcomm Snapdragon 800 quadcore 2.2 Ghz, Adreno 330 GPU at 450 Mhz, or perhaps the next step up from there. This will provide an excellent, smooth experience at HD resolutions, as well as game performance in the neighborhood of an Xbox 360.
Why are games important, and why does Amazon need its own game developer? First of all, games are the largest single app category on mobile devices, and by far on console devices. Many people already have a device connected to their TV capable of streaming video, so why would they want another one? A low-cost gaming console with some very attractive games and good deals on Amazon streaming offers a compelling answer.
Why can't you just use existing Android games? Here's where it gets more interesting. Yes, Android games could be played on a TV, but as we've seen with the Ouya console people aren't thrilled with them. Games designed around a touch screen don't work well with a controller, for the most part. (Some simple games could be easily mapped onto a motion-sensitive controller with a single button, like a Wiimote; some like Angry Birds or Fruit Ninja or Wii Tennis would work fine this way.) Trying to use a smartphone or tablet as a controller for a TV screen is hard to pull off, as you are constantly shifting from watching the small screen to the big screen (the Wii U has this problem, too).
You really need games built for a console controller, which is where Double Helix's expertise comes in. If Amazon can have a great fighting game, a great FPS, a great RPG and perhaps a simple arcade game or three, that would make the Amazon console a convincing game machine. Once Amazon sells a few million, Android developers would be eager to provide serious support with controller-revised versions of their games. Ouya has been hoping for that, but without the ability to sell millions of consoles in a short time or pay for development, Ouya has been stymied. Amazon will have no such problems.
Amazon also won't have to worry about providing boxed games to retailers, which means Amazon console games can be whatever price Amazon desires, even free-to-play. Amazon could sell their console with a simple Wiimote style controller for $79, and sell a classic controller bundled with a fighting game for $29.
Beyond the games, look at the potential for unique shopping experiences. You're watching the latest episode of House of Cards on your Amazon console, and you see a great outfit or suit. Press the button on the remote and up comes the Amazon listing for that clothing item; press another button and it's delivered to your door in two days. Or you see a slick car being driven onscreen; press a button and find out where you can test-drive it in your area (wouldn't auto dealers pay to be in on that?).
With the possibility of advanced Kinect-style cameras, or just proper usage of a smartphone camera, you could provide accurate measurements to Amazon so that perfectly fitted clothing would be available with a button press. All of the shopping tools that Amazon has developed on their web site could be present, and even enhanced, by an Amazon console.
We don't know for sure what Amazon will do, but it is interesting that Lab126 has more than 250 job openings. That seems like far more than you'd need to work on existing tablets and Kindle e-book readers. A rumor that Amazon might buy Microsoft's Xbox business has been floated, but denied by Microsoft – and it seems pretty silly for multiple reasons. Why would Amazon spend big bucks for the Xbox business? Amazon can build its own console business for far less, without all the entanglements of the Xbox (with its many connections to other Microsoft services) and without the legacy of selling $60 boxed games. The purely digital console business is far more attractive and profitable.
Don't be surprised if you see an Amazon console announced by the summertime for shipment this fall, or even before. Amazon is a competitor to watch, and an interesting opportunity for game developers in the future.