Why Amazon Will Announce Its Own Streaming Device Tomorrow

Tomorrow, Amazon will amp up its bid to take over your living room.

At a media event in New York City, it's expected to announce a new gadget - either a dongle or a box - that will let users stream video to to their TVs from Amazon's own video library, as well as from services like Netflix and Hulu. It will reportedly run on Android, and could act as a gaming console.

The streaming device market is crowded. Amazon's gadget would compete against products like Apple TV, Roku, and Google's Chromecast.

So, why would Amazon take this plunge?

In his book, "The Everything Store: Jeff Bezos and the Age of Amazon," released last year, author Brad Stone wrote, "Will Amazon introduce a mobile phone or an Internet-connected television set-top box? Yes, because the company wants to offer its services on all the connected devices that its customers use without having to rely entirely on the hardware of its chief competitors."

The over-arching philosophy for Amazon is to create an "everything company." To achieve that goal, it needs a complete top-to-bottom system to create media and distribute it to customers. By releasing its own streaming device, Amazon closes the gap between users' computers and their TVs, without funneling money to Roku or Chromecast.

Since releasing Amazon Instant Video in 2011, Amazon has been making huge investments to beef up the catalog of movies and TV shows which it offers to Amazon Prime customers for free instant streaming. It started releasing its own original shows, like "Alpha House" and "Betas," last year, and has six new ones on deck for 2014.

The market for streaming devices is still small but predicted to grow hugely in the next several years, and thus Amazon has an opportunity to make a dent. Google's Chromecast has 14% market share after less than a year.

The hardware alone would never be Amazon's bread-and-butter, though.

Recent research revealed Kindle owners spend, on average, $443 more buying stuff from Amazon than the average Amazon shopper who does not own a Kindle.

Like the Kindle acts as a portal to Amazon's books, a new TV streaming gadget would provide instant access to Amazon's ever-growing catalog of movies and shows, which would boost Amazon sales overall.

Even though Amazon's Kindle line only accounted for about 2% of tablet shipments worldwide last year, Morgan Stanley estimated that the Kindle ecosystem - which includes digital media sales - would account for 11% of Amazon's revenue and 23% of its operating profit.

Like the Kindle line, a streaming gadget will likely be priced extremely competitively (maybe even lower than the Chromecast's $35), because Amazon would make money through media sales, Prime memberships, and, potentially video ads.

Business Insider Intelligence forecasts good things for an Amazon TV gadget, if it indeed launches tomorrow.

"Amazon already has a media ecosystem, they already have an ad network, and they already have a tested monetization strategy," says Business Insider Intelligence reporter Mark Hoelzel. "Plus they have 20 million Prime Members who would see a sub-$35 streaming device with unlimited Prime streaming as a no brainer."

Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.