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Rumor: Amazon Working on Apple TV Rival

Will we soon see Kindle TV? After all, the company already produces an e-reader, several tablets and is supposedly gearing up for a Kindle smartphone. A set-top box based on the Kindle experience seems like a natural step, and three unnamed sources have confirmed just that, saying that the device will connect to HDTVs and stream the company's expanding video offerings.

Here's why this makes sense: Amazon Instant Video and Instant Video Prime. Customers can already purchase and rent content through the standard Instant Video storefront, and stream or download that content to compatible, authorized devices. And by paying an annual fee, customers can gain access to the exclusive Prime library of content that's working hard to steal subscribers away from Netflix.

And then there's Amazon Studios, the original film and series production arm of Amazon. The studio just launched fourteen Originals TV pilots which features well-known stars like John Goodman, Jeffrey Tambor and Bebe Neuwirth. It's as if Amazon is working to become its own TV network, offering shows in a wide variety of genres including Zombieland, Teeny Tiny Dogs, Those Who Can't and the Onion News Network.

Granted all content provided by Amazon – whether it's an original show or a blockbuster movie from Paramount – can be accessed through the Amazon Instant Video apps for numerous devices including the Kindle Fire HD, Xbox 360, iPhone and more. But what if Amazon planned to launch a set-top box that offered consumers a discount against Amazon Instant Prime? What if it was also Android-based and allowed users to download their compatible apps? That gadget would likely sell like hotcakes.

Sources claim the set-top box will compete directly with similar products like Apple TV, the Boxee Cloud DVR, the PlayStation 3, Xbox 360 and others. That indicates the device could be app-based to some extent, offering other services like Netflix and Hulu Plus as a downloadable option. Amazon Instant Video, Amazon Cloud Player, the Silk browser, the Amazon Appstore and perhaps even Kindle will be integrated into the OS much like they are on the Kindle Fire tablets.

The device is also reportedly in development at Amazon's Cupertino-based Lab126 division, with the project headed by Cisco's former vice president of emerging video products, Malachy Moynijan. Also reportedly on the Lab126 staff is Andy Goodman, formerly a top engineer at TiVo and Vudu, and Chris Coley, a former hardware architect at ReplayTV.

Jason Krikorian, former co-founder of Sling Media and currently a general partner at venture capital form DCM, said Amazon's move to produce a set-top box certainly makes sense. "They have a ton of content, an existing billing relationship with millions of users, an existing Android app marketplace that could be leveraged on the box, a reputation for solid hardware products and a terrific channel through which to promote the product."

So far it's unknown what the actual name of the product will be, but Amazon will likely stick with the familiar and highly-popular Kindle brand. There's also a good chance customers will see the gadget introduced alongside the third generation of tablets this fall.