Amazon released the Fire TV Stick Basic Edition a couple of days ago, making Fire TV hardware available in over 100 new countries for the first time. The Fire TV Stick Basic Edition takes the existing 2nd generation Fire TV Stick but replaces the Alexa voice remote with the non-voice remote that was included with the original 1st generation Fire TV Stick. Even though the Basic Edition package includes a cheaper remote and fewer features, at $49.99, it’s $10 more expensive than the $39.99 regular Fire TV Stick that comes with An Alexa voice remote. That shows us just how much Amazon subsidizes the regular Fire TV Stick and here’s why.
Subsidizing the Fire TV and Fire TV Stick means that Amazon sells these devices at a lower price point because they expect to continue to earn revenue after the device is purchased. That post-purchase revenue comes from numerous sources, like selling movies, TV shows, apps, and games, as well as displaying ads. This is how Amazon managed to introduce the original 1st generation Fire TV at $99 when analysts estimated that it had a manufacturing cost of $93.
The Fire TV Stick Basic Edition does not provide Amazon with the same post-purchase revenue potential, which is why it costs more for an inferior device. The main interface on the Basic Edition does not consist of movies and shows to entice you to spend money, like the regular Fire TV Stick. It does not even have a universal search feature to uncover additional content. Instead, the interface is just an app launcher and users must launch a streaming service app, like Amazon’s own standalone Prime Video app, to view content.
I know some of you reading this are thinking that’s exactly what you want from your own regular Fire TVs and Fire TV Sticks. A simple grid of apps, like the ones you’ll find on countless generic Android boxes from no-name manufacturers, certainly has some advantages, but what the Fire TV Stick Basic Edition shows us is that simplicity comes at a cost.
Back when Amazon was selling the 1st generation Fire TV Stick with a non-voice remote for $39.99, they introduced a new bundle that packed the same 1st generation Fire TV stick with a voice remote for $49.99. Since swapping in a voice remote increased the price by $10, we can estimate that a Fire TV Stick Basic Edition with a voice remote would cost at least $60. That tells us that the regular Fire TV Stick with a voice remote that Amazon sells for $39.99 to US customers is subsidized by at least $20.
I say “at least $20” because even at $49.99, the Fire TV Stick Basic Edition is likely also being subsidized. The purpose of the Fire TV Stick Basic Edition is not to sell streaming hardware at a profit. It is surely being released to sell the new global Prime Video subscription service, which in turn’s purpose is to sell Prime membership, which in turn’s purpose is to sell paper towels, and so on. Even though the Fire TV Stick Basic Edition doesn’t have as high of a post-purchase revenue potential as the regular Fire TV Stick, it’s still a part of Amazon’s interconnected web of products and services.
As a guy who’s just here to tinker with gadgets and write about them, the economics of Fire TV devices and a company like Amazon are way over my head. I’m just saying that the seemingly strange price of the Fire TV Stick Basic Edition is a clear example that there is a lot more going on with the Fire TV, and most other streaming devices, then simply a manufacturer making a device and selling it for a profit, like you might think.
Even Roku, which many think of as a “neutral player” since they don’t have a content store of their own, now makes only 19% of their profit from hardware sales. To stay competitive with hardware pricing, streaming devices need to be subsidized because nobody is going to pay $60+ for a 1080p streaming stick.