DIAGNOSIS Yes, it's normal for it to get warm, but not so hot you can't keep your hand on it. The 3rd gen has a fanless design, so it dissipates heat through the aluminum chassis. High-quality 4K/HDR video decoding generates heat.
FIX The main fix is improving airflow. 1) Make sure it's not stuffed into a cramped media cabinet slot. Leave at least 2-3 inches of clear space on all sides, especially the top and back. 2) Don't stack anything on top of it. 3) Ensure the vents on the back and bottom aren't blocked by cables or dust.
IF THAT DIDN'T WORK If it's still excessively hot, check for software issues. A stuck process can cause the processor to work overtime. Go to Settings > System > Restart to do a full software reboot. Also, check for updates in Settings > System > Software Updates.
HEADS UP If the unit gets hot enough that the video starts stuttering or it randomly restarts, that's a sign of thermal throttling or a fault. In that case, it's not normal and you should contact Apple Support, as the thermal paste or internal heat sink might be improperly seated.