But why not have a settop box? Assume for a second that Amazon can get their content on to every hardware device out there:
Right now the majority of hardware devices in the set-top box arena for streaming content are also players that are providing their own content. If, for example, AppleTV+iTunes or XBox+(w/e it's called) become HUGE, and the majority of households have one, they can cut Amazon out with absolutely no loss or fear. Even if you're a customer that favors amazon content what exactly are you going to do?
Now imagine a world where Amazon has a solid but not quite as slick device as Apple, and has 10% of the hardware, and Apple has 90% of the hardware. But assume the content is split 50-50 regardless of the device being used. Now can Apple afford to cut Amazon content off their device? They stand to lose a lot of hardware sales, potentially as much as half.
Even if Amazon hardware doesn't sell well, it represents a threat, one that current Apple customers could move to if Apple does anything stupid even in the short term. It also gets Amazon practiced at making good hardware. If Amazon doesn't have that ace of their sleeve and expertise in their pocket, Apple or anyone else can make an Aggressive move and it would take Amazon years to respond with their own hardware solution. Take any cell phone company that is now folding: They were unprepared and it took them too long to build devices that could even be considered second rate.
Amazon may not be shooting for first place, but they want to be in the race, and as a consumer I'm glad they will be, even if I'm quite happy with my Apple TV right now.