Media

Amazon plays for the crown

This story is written by Shawn Busteed, VP of technology and programming for marketing firm TBA Global.

Amazon has always been a force to be reckoned with, yet new developments suggest the company may be on a path to becoming the single most dominant force in the technology world.

Rumors that the company might be launching its own smartphone have been swirling ever since the launch of the original Kindle.  Two months ago, Bloomberg went as far as to specifically state that notorious Chinese manufacturer Foxconn will be producing the mobile device. Everybody seems to be jumping on this bandwagon – The VergePC Mag, and CNN, among others, all claiming an upcoming Amazon Phone announcement.

These rumors represent a bold new move to some, but truth be told, Amazon has always set its sights several notches higher than what pundits and competitors have expected. And you know what? To date, it has always succeeded.

Given what Jeff Bezos, Amazon’s quixotic CEO, has said about the company’s past technology and business moves, an Amazon smartphone is inevitable if not yet a reality.

Only the paranoid survive

While the nomenclature people use may be different, it is clear that we are moving into either a post-PC or a post-Web world.  In this new paradigm, connected devices like phones, tablets, and smart TVs are coming to dominate the consumer experience more and more.

Smartphones are already outselling PCs by a wide margin — not a huge surprise considering their lower price and mobility. According to IDC, tablets and smartphones combined will be outselling traditional PCs by more than 2 to 1 by 2016.

Amazon’s entry into the platform war will pit the company against digital stalwarts like Apple, Google, and Microsoft for control of the flow of content from books, movies, TV shows, and beyond. The company could have chosen to be a small part of these ecosystems with movies and music, but instead it has chosen to develop its own controlled ecosystem to guarantee access to consumers.

Looking for a Kingdom, not a Dukeship

Amazon’s move into this traditionally low-margin, high-risk business might seem puzzling. After all, Bezos is famous for his ability to reduce questions down to “fact-based decision” whenever possible. In his house, anything and everything must be answered with verifiable numbers. And the results speak for themselves. Amazon.com has come to dominate e-commerce in a way that no retailer has been able to effectively compete with.

Amazon’s previous moves make it clear that the company is targeting much more than e-commerce domination. The company’s launch of Amazon Web Services in July 2002 might have seemed overly ambitious or borderline crazy, but the payoff has been immense, with major companies like FourSquare and Netflix coming to rely on Amazon’s cloud. While the Kindle products may not move as far outside Amazon’s wheelhouse as cloud computing, the e-reader and tablet all seem like unproven lines of business for an e-commerce retailer that also sells Sony Readers and iPads at the same time. So why?

While data-driven decision making may be good practice, Amazon’s more interesting moves have been in cloud computing and mobile devices where there’s so much uncertainty that decisions can’t be narrowed down into a mathematical equation. As a forward thinking technologist, Bezos can grasp that the long term value of the relationships he’s developing with Amazon customers across platforms makes the risk worthwhile. To that end, Bezos has relentlessly pushed to make Amazon the most powerful company in the technology world because he wants the company to adapt, survive, and dominate.

Royal Politics: Know Your Opponents

The proliferation of gadgets and app-like Web technologies has produced a glut of content as every media provider and creator engages in an “every platform” strategy.  While the list of companies that are taking this tack is way too long, some of the familiar names include Netflix, Hulu, HBO, MLB, and the New York Times. These companies are on every PC, every major tablet brand, every smartphone OS, and every set-top box.

Amazon could join this throng of media companies, or it could go the next step and deliver the entire content package, competing to be the platform of choice for consumers.  The streaming products it offers with Amazon Instant Video and the Kindle platform pit the company directly against Google, Microsoft, and Apple, each of which has its own content delivery network. To be as big as Bezos wants Amazon to be, he has no real choice but to develop his own ecosystem to ensure that he has continued access to the consumers he needs to drive millions upon millions of transactions.

The future of media has already proven to be defined, to a large extent, by the actions of four companies: Amazon, Apple, Microsoft, and Google. Google and Apple were the first, followed quickly by Amazon and an even slower Microsoft, to share a common transformational view of the digital landscape over the next 20 years. Each company brings a different heritage and ideology that stems from its core business, but each company is striving to dominate a digital world that includes new devices and a content-driven economy. The upcoming transformation may be as big as the Internet itself.

Amazon is not the only player realizing the precipice that the digital movement is approaching. Microsoft will soon be debuting its own line of branded devices in its Surface tablets.  The Redmond giant is gearing up for a battle on all fronts with the upcoming releases of new ARM-based Windows RT devices, Windows Phone 8, and a next-generation Xbox game console — all of which will be based on its Windows 8 platform or some variation thereof. Microsoft hopes that Metro, or Windows-8 style or “Modern UI” will be the preferred interface to the digital world and your digital wallet.

The steps of both Amazon and Microsoft outside of their traditional core business follow other major industry players. Even Google has breached the wall between software and hardware with its Android platform and its Nexus line of hardware from phones, to tablets and to now-defunct media players. Also, don’t expect rumors of a Facebook phone to fall to the wayside anytime soon.

Your Move, Amazon

So what is Amazon going to do over the next few quarters as this “content war” gears up? A few predictions:

  • There’s almost no limb to go out on: Amazon will launch a smartphone. This is not just a might. It is too critical that the company have access to consumers on these new devices, and it has staked too much on digital content streaming to back down now. It’s likely that an Amazon phone will use an evolved architecture based on the Kindle Fire’s modified Android-based OS and ARM-based hardware, be priced exceptionally low with margin made up on content, and a subset of the Android App store available at launch.
  • Amazon is positioned to up-end the set-top box market and will introduce a box of its own. A lot of the content Amazon already sells through its Kindle platform and the Web is built for large-screen consumption.
  • Amazon will blow out Amazon Prime and Instant Video. Prime is the company’s Netflix killer, and given Netflix’s missteps, Amazon has an opportunity to step in. The company will likely see rapid growth once consumers can have items purchased on the Web accessible on any device they have on hand.
  • All these moves culminate in the Holy Grail of commerce: Amazon will integrate physical product purchases into all of its digital efforts to sell a mountain of physical goods.  While Amazon is now securing the beachheads of the digital frontier, it will focus again on its physical product shipping as consumers make orders from anywhere on their devices.

Conclusions

Despite numerous challenges, Amazon will not only compete but have a great shot to win. At the end of the game, Amazon will have a tablet and a phone for mobility and to act as a controller in the living room. It will be able to offer HD movie and TV content, and it will be able to offer content on slimmer margins than almost everyone else. Unlike any other company in history, Amazon is positioned to offer consumers on-demand products of any kind, digital or physical, from any location.

Analysts focused on the battle for the tablet market or the smartphone market could miss the larger content wars looming as Apple, Google, and Microsoft position themselves to be the entryway to all commerce. That said, the Kindle Fire and Amazon Web Services are just the armor as the company prepares for all out war. Adding an Amazon smartphone to this, with your credit card number attached, will provide the necessary firepower for victory.

Shawn Busteed is VP of technology and programming for marketing firm TBA Global. Prior to joining TBA, Shawn held crucial roles in highly-regulated industries, from business development in the Federal marketplace to program management for the National Institutes of Health (NIH). As the global head of programming for the New York Stock Exchange (NYSE) Euronext, Shawn oversaw a team of 35 editors, writers, and content producers working in six countries to program a global network of community and content sites. Prior to that, Shawn lead the implementation of Facebook’s Connect and Social Plugins for the NHL.com, doubling engaged audiences in less than two weeks and developing an ongoing SEO and video content strategy for the brand, across its network of sites and digital platforms.

[Top photo credit:  Iaroslav Neliubov/Shutterstock]

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