The e-commerce company's device will give users access to Amazon's expanding video offerings, including its video on demand store, which features newer movies and TV shows, Business Week reported citing information from three sources familiar with the project.
An Amazon set-top box would enter a crowded market and have to compete with similar products such as the Roku, Apple TV and the Boxee Cloud DVR, along with more devices such as the Playstation 3 and the Xbox that can also stream video.
The set-top box, so far without a name, is being developed by Amazon's Lab126 division in Cupertino, Calif.
Amazon has been building up its presence in the video arena, financing 14 television pilots and paying handsomely to secure exclusive streaming rights to hit shows such as "Downton Abbey."
When contacted about the set-top box, an Amazon spokesperson declined to comment, Business Week said.
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