The company, known as R2 Studios, has been working on technology related to distributing and displaying digital media on TVs, a big new battleground for technology giants. The Silicon Valley-based business also talked to Google Inc. and Apple Inc. about a possible deal, people familiar with the matter have said.
Microsoft acquired the company to beef up its Xbox offerings. Founder Blake Krikorian, who also founded Slingbox, will join the company with a small team and leave Amazon's board. Microsoft also grabbed some patents owned by startup relating to controlling electronic devices.
The price of the acquisition is still unknown.