This Could Be the Next Big Thing for Amazon.com, Inc.
Amazon.com, Inc. (NASDAQ:AMZN) stock rose in Friday trading after the online retailer announced it will be removing Google Inc. (NASDAQ:GOOG) Chromecast and some Apple Inc. (NASDAQ:AAPL) products from its web site.
Amazon has announced it will halt the sale of streaming devices from Apple and Google because they are incompatible with its Amazon Prime video service. (Source: Bloomberg, October 2, 2015.) The company has lately been more and more willing to flex its muscles and market share when it comes to promoting products and devices that are beneficial to its retail strategy.
Both the Apple TV and Google Chromecast have been removed from Amazon’s retail list, with the Seattle-based company citing compatibility issues with its Prime Video service. New listings for these devices won’t be allowed, while existing items in Amazon’s online inventory are to be removed by the end of October.
Amazon.com Keeps an Eye on the Shopping Season
As we get ever-closer to the holiday shopping season, Amazon has been making it abundantly clear that it is more than willing to suffer decreased sales of hot-selling items if it benefits its own video streaming line. (Source: CBC, last accessed October 2, 2015.) Google and Apple currently produce the best-selling streaming devices sold on Amazon.
Amazon appears to be serious about its expansion into the online video streaming industry. This includes producing its own original content for online streaming, with the notable example of the award-winning comedy Transparent. The e-commerce giant has had to find ways to both reward existing Amazon prime subscribers and attract new ones, with exclusive new shows being the cornerstone of this initiative.
Decreasing the sale of devices which have trouble handling its online streaming service is part of that strategy.
This will inflict more pain on Google than Apple, which operates its own stores to sell its devices and related products. Some analysts have pointed out that customers looking to purchase these items may simply go to alternative online retailers like Best Buy, and the only company to suffer a significant loss will be Amazon. (Source: Wall Street Journal, last accessed October 2, 2015.) But this is thinking too narrowly within a near-term framework, and ignores what Amazon is really doing.
The overall strategy seems to be clear; Amazon wants to keep its customers from purchasing its competitors’ devices on its own e-commerce platform. While this may hurt Amazon’s bottom line in the form of decreased sales, it may end up forcing Apple and Google to support Prime video streaming services, like other device manufacturers have.
Here’s Why I’m Bullish on AMZN Stock
It is moves like this with long-term payoffs, it will be giving uplift to the Amazon stock price.
The competition in the streaming online video industry is surging, and this latest move by Amazon is aimed at pushing its latest products—the Fire TV and plug-in stick—into the increasingly crowded market.
Now, Amazon is to online commerce as Google is to search engines. The e-commerce giant generates revenues of about $100 billion a year. Its CEO Jeff Bezos has been quite open that it’s not about profit at the moment. What Amazon is focusing on is industry dominance, which includes encroachment on the market share of physical retailers.
How Big Could This Get?
The long-term outlook is quite positive, but contingent on Amazon being able to pull off a number of tricky maneuvers and pulling together the advantages it enjoys over some competitors.
Amazon could very well become one of the biggest on-demand video streaming companies, in an industry which is currently swallowing up traditional cable and broadband TV subscriptions. (Source: Business Finance News, last accessed October 2, 2015.)
What makes Amazon unique, you ask? Besides Apple and Google working away on their own streaming platforms and devices, Netflix is already the undisputed king of the streaming business.
This is where those competitive advantages come into play, and where Amazon can bring to bear its considerable financial resources, market position, and injection of value-added services to lift itself above the competition.
Here’s the Bottom Line on Amazon.com Stock
What Amazon offers its customers is Prime, which in addition to streaming video, gives subscribers free shipping on Amazon products. Additionally, it allows for downloading streaming videos to watch them later. (Source: Fortune, last accessed October 2, 2015.) Netflix, notably, does not yet offer this option.
If the online retailer can keep expanding aggressively, it has the potential to become, along with Google and Apple, one of the largest global “television” providers. It’s for this reason that I’m extremely bullish on Amazon stock.