Amazon’s disingenuous plan to remove Fire TV’s competition grows

Earlier this month, reports indicated that Amazon planned to stop selling the Apple TV and Google’s Chromecast products through its online marketplace. While the devices are still available right now, they’re scheduled to be pulled at some point today, according to Bloomberg’s initial report on Amazon’s plans.
So why is Amazon doing this? Well, the company would have you believe that it’s trying to prevent consumer confusion, because neither of those competitive devices support its Prime Video service as well as its own Fire TV set-top boxes. But several reports published over the last few days offer an alternative theory.
First came a GeekWire report about Amazon’s apparent plans to introduce a QVC-like channel to the Fire TV. This shopping network would complement a new feature the company is reportedly testing with a small number of users: The ability to purchase items shown on-screen directly via the Fire TV remote.
The report says that Amazon wants to sell items via banner ads shown on the main Fire TV interface, and through the X-Ray feature, which uses Amazon’s IMDb service to share information about whatever a person is watching. (It can identify actors, for example, or share background info about a scene.)
These shopping features wouldn’t be as easy to implement on competitive products. Nor would Amazon make as much money from them — Apple takes a 30 percent cut from all transactions made through its platforms, which is why Kindle users can’t purchase new books via the company’s iOS applications.
That’s a compelling enough reason not to believe Amazon’s claim on its own. Saying it was trying to help its Prime customers was likely disingenuous; it seems more like Amazon is trying to do its best to promote a potential revenue scheme than like it was trying to make sure its most loyal customers are happy.
Then came the revelation, courtesy of BuzzFeed’s review of the new Apple TV, that Amazon could very well introduce its Prime Video service to the platform. Here’s what the review said, captured in a handy-dandy little “screenshort”:


I’ve reached out to Amazon for comment on this claim. Right now it seems damning. If the company can introduce Prime Video to the Apple TV, wouldn’t the customers it’s trying to save from befuddlement be better served if it did that, instead of pulling from its website a device they might want to purchase?
None of this will really stop people from buying a new Apple TV. Like I wrote when Amazon’s plan was revealed: The company isn’t hurting anyone but itself, given the ease with which someone can point their Web browser to Apple’s website instead of refusing to buy something not on Amazon’s market. It’s very possible that Amazon is trying (likely in vain) to retain some of the market share for streaming boxes it swallowed up due to years of Apple neglecting to update the Apple TV.
I’ll update this post if Amazon responds to my request for comment. Not that I’m holding my breath — when the company isn’t sending me press releases about new products or making sure I see Medium posts, it’s fairly tight lipped. Given the apparent duplicity at work here, I don’t expect any comment from it.

Netflix wants to hook up with your cable company in 2015

Netflix’s new strategy to take on cable involves becoming best friends with cable: The video streaming service has been working hard to get its app included on set-top boxes of cable, fiber and satellite TV operators, and has been looking to strike deals with major U.S. operators. These deals could not only greatly expand Netflix’s potential audience, but also change how the company deals with both consumers and operators.

Internally, partnerships with TV operators are seen as the next big step for the company. Earlier this year, a Netflix job offer put it this way:

“After having Netflix integrated on every relevant TV, Blu-Ray Player, Streaming Box, and Streaming Stick our new frontier is now cable boxes. We want to reach our current and future members on devices they use most frequently to watch linear TV, cable, and satellite set top boxes. (…) Our mad dash to integrate Netflix into all devices was just the start, now things start to get interesting…”

[company]Netflix[/company] struck deals with a few smaller U.S. cable operators earlier this year, including [company]Suddenlink[/company] and [company]RCN[/company], which all use TiVo’s DVR as their standard set-top box. However, [company]TiVo[/company]-based pay TV boxes are in less than two million U.S. households, according to numbers disclosed in some of the company’s recent financial filings. Roughly 90 million U.S. households subscribe to cable or other forms of pay TV, and more than 73 million subscribe to the biggest five operators alone. That’s why Netflix has been working hard to team up with one of these major operators.

I’ve been told by sources with knowledge of the company’s plans that it is getting closer to finalize and announce a deal with at least one of these major operators. One source told me that an announcement may come as early as early next year, but others have cautioned that an actual deal may not be announced until much later. One of the names that kept coming up in chatter about Netflix’s plans was AT&T, but other alliances are also possible.

Who is Netflix going to partner with?

With around six million subscribers, AT&T currently ranks fifth in the list of the country’s biggest TV service operators. It’s much smaller than Comcast, which has more than 22 million TV subscribers, but it aims to become number two by combining with DirecTV, which it intends to buy for a whopping $48.5 billion.

AT&T has been more progressive than other operators with regards to online video, launching a joint venture called Otter Media with the Chernin Group that is investing in and developing niche video services. But for Netflix, there is another reason to team up with AT&T: The company uses Ericsson’s Mediaroom set-top boxes, which are also being used by Germany’s Deutsche Telekom for its Entertain pay TV service.

Netflix has already built a version of its app for this hardware, and Entertain subscribers have been able to access the app through their set-top boxes since October. That’s an important detail: Netflix likes to custom-build apps for the chipsets of devices on which it is running on to optimize speed and performance. Adapting the app it built for Deutsche Telekom to run on AT&T’s TV boxes should be easy for the company.

But AT&T isn’t the only possible candidate. I’ve heard from industry sources that Netflix has approached a number of U.S. pay TV operators for similar deals. Some of these negotiations have apparently been tied to talks about peering and caching Netflix traffic. Netflix agreed in recent months to pay Comcast, Verizon, Time Warner Cable and AT&T for peering despite publicly insisting that it shouldn’t have to do so; I’ve been told that similar discussions with operators in Europe ended with “broad agreements” that included both peering and set-top box carriage.

Netflix becomes part of your cable bill

Publicly, operators have been all over the map on partnerships with Netflix. Comcast has been the most conservative company, despite having developed a next-generation set-top box that could easily include Netflix’s app. In fact, Comcast’s proposed takeover of Time Warner Cable reportedly killed a partnership between Netflix and Time Warner Cable. Verizon on the other hand has been a lot more Netflix-friendly in recent months, to the point where it even offers new subscribers of its FIOS TV service 12 months of free Netflix as part of a promotional deal.

Pay TV operators have in the past shied away from including Netflix on their set-top boxes because they saw it as a direct competition to some of their core business, which includes reselling premium cable channels like HBO and Showtime.

However, I’ve been told by multiple sources that Netflix may be willing to sweeten the deal for cable companies by using financial incentives, which could include a monthly cut out of the company’s subscription fees. Up until now, Netflix has only paid consumer electronics manufacturers a one-time bounty for helping to sign up new customers, but no recurring fees. In exchange, operators may include Netflix subscription fees in their monthly cable bill. Netflix recently pioneered these kinds of billing relationships in the U.K., but could bring them to the U.S. as well.

Like a cable channel, with some key differences

Netflix executives have long said that they want to become more like HBO. These remarks have generally been seen in the context of Netflix’s original programming initiatives, but Netflix’s attempts to get onto the set-top boxes of major operators show that there is a lot more to this strategy. Netflix executives have realized that there are millions of consumers out there who won’t buy a Roku or Chromecast any time soon and feel most comfortable with the set-top box that’s already in their living room.

That’s why the company wants to be on those boxes; not just an app hidden in the menus most people never access, but right in the channel grid, next to properties like Showtime and HBO. Add a billing relationship to the mix, and subscribing to and watching Netflix may just become as easy as changing the channel to HBO, even for people who are not internet-savvy.

However, even with Netflix cozying up to cable, it wants to maintain one key difference to traditional cable channels: The company still is going to maintain the customer relationship. Consumers will be able to cancel their Netflix subscription any time on the Netflix website, and won’t be locked in to big bundles with two-year contracts.

In other words: Netflix wants to be on your cable box you’ve learned to live with, but not part of the cable bundle you hate so much.

Time Warner Cable’s next CEO: Sure, we could add Netflix

Time Warner Cable’s incoming CEO is open to adding Netflix’s app to his company’s set-top-box. Rob Marcus, who will begin his gig as CEO of Time Warner Cable In January, said as much at the UBS Global Media & Communications Conference in New York Monday, according to Variety. That’s somewhat different from Comcast, whose CEO recently said that a partnership with Netflix is “not really a high priority” for his company. Netflix has started to work with ISPs overseas to get its app onto their set-top-boxes, but Netflix CEO Reed Hastings has said that he only wants these partnerships if his app gets prominent placement on set-top-boxes.

Boxee clashes with cable companies over encryption

Boxee isn’t just marketing its live TV tuner as an alternative to cable; it is also fighting with cable companies about having access to their programming. The reason? Cable companies want to encrypt their basic cable tier, which Boxee and other CE makers oppose.

Could Google TV get its Kindle Fire moment?

Google TV is taking a big step with its update to version 2.0 — but what’s in the card for the platform’s future? Could one day a vendor fork the code to establish a separate Android-powered TV platform, much like Amazon did with the Kindle Fire?

Can Microsoft become the next big subscription VOD player?

Microsoft could be rolling out a new subscription video service later this year, pitting it against services like Netflix and Hulu Plus, as Microsoft seeks to grab more revenues from Xbox subscribers. But it will need to be available on other devices, too.

Roku 2 revealed. Thanks, FCC!

Pictures and details of the next generation of Roku set-top boxes have been revealed, thanks to a filing with the FCC. So should you get ready to buy one? It probably depends on if you already own a Roku — and how much you like Angry Birds.

For the energy of the Internet, look to the end devices

A common misperception is that the bulk of the energy consumption associated with the Internet and connected-computing comes from massive data centers. In reality, the billions of end devices — computers, set-top-boxes — are currently the bigger and more wasteful culprits.

Your DVR’s dirty little secret: It’s an energy hog

Set-top boxes aren’t energy-efficient, and cost U.S. residents more than $3 billion annually in energy bills, according to a new study. More importantly, about two-thirds of those energy costs come at times when no one is even watching TV or using the devices.