Amazon is developing a range of hardware products including an audio-only streaming device and a smartphone with 3D capabilities that does not require special glasses, according to a report in the Wall Street Journal. The development of another smartphone and a set-top box for streaming video on televisions has already made the news. The Wall Street Journal's sources emphasized that some or all of these products may never be released.
Amazon uses its branded hardware to drive other parts of its business. Take, for example, the Kindle Fire tablets. With a price tag ranging from $159 to $399, the tablets are priced at cost to compete with the more expensive iPad -- which starts at $329 -- and fuel purchases of digital and physical goods through the wide-reaching Amazon store. The strategy appears to be working. Device sales have cut Apple's lead in tablet market share to roughly five percentage points -- 48.2% for Apple versus 43.4% for Amazon -- in the first quarter from 29 percentage points a year ago, according to Strategy Analytics. The strategy could be financially sound, too. An ABI Research analyst calls the strategy "a credible proposition" and estimates the company needs about $3 of incremental profit each month to achieve a 20% profit margin.
The Wi-Fi audio device, meant for streaming through speakers or a television set, would have implications for the music industry. It could be a complementary device that rounds out a digital music ecosystem just as Apple's AirPlay device has long given iTunes users a way to stream audio to any stereo or speakers. Or it could mean Amazon wants to offer a complementary product if and when it launches a music subscription service. The company is said to be in exploratory talks with record labels for a service that would compete with Spotify, Rhapsody and other on-demand services. Or the device could be meant as a complement Cloud Player, Amazon's cloud-based music locker and streaming service. A Cloud Player app is already available for Roku, Samsung TV and Sonos. In any case, a WiFi audio streaming device would help Amazon give its customers a better listening experience.
The smartphone's potential impact on the music industry is even less clear. Mobile phone operating system shares are likely to be impacted if Amazon is a new entrant to the smartphone market. An Amazon smartphone would probably run the Android operating system (Amazon's Kindle Fire tablets run a version of Android). Android could grab market share from Apple's iOS and Microsoft's Windows Phone by bringing new customers into the smartphone market. Amazon's ability to tap into its massive customer base -- which undoubtedly harbors many late adopters -- would reach many of the 42% of U.S. mobile subscribers age 13 and over who still use feature phones (as of March, per comScore).
Mobile phone market shares impact use of certain music-related apps and stores. An Amazon smartphone could lead to increased download sales through the Amazon MP3 app that's currently available to Android users. It would change the addressable market for Android apps as well as the number of people unable to use iOS-only apps.