More Upside for AMZN Stock?
When Amazon.com, Inc. (NASDAQ:AMZN) added its online streaming video service, “Prime Video,” to its “Prime” delivery subscription, it looked like little more than an afterthought. It definitely wasn’t in the same league as Netflix, Inc. (NASDAQ:NFLX). There wasn’t much of a selection and it just seemed like a cheap way to entice more people to sign up for a Prime subscription. But over the years, Amazon has been steadily building up its catalog of movies and what the e-commerce giant has planned next for the video service could give a big boost to AMZN stock in the coming years.
Amazon just announced that it’s going head to head with Netflix in the battle for the top spot in the streaming video wars. Amazon will now offer Prime Video on a stand-alone basis for $8.99 per month. That could be a huge blow to Netflix, which charges a dollar more for its service. Even though Netflix has the bigger and better content library, it’s going to be hard to convince customers it’s the better option so it’s worth more money and that will only benefit AMZN stock.
Of course, which service is better is subjective, but there’s probably universal agreement at the moment that Netflix is the better bang for your buck. Netflix has been investing heavily in building its library by developing original content, such as hit shows like Orange Is the New Black and House of Cards. In 2013, Netflix received 14 Emmy nominations. At the most recent awards show last year, that number went up to 34 nominations.
But Amazon is also gaining steam in the quality of its programming. This year, Amazon joined Netflix as the only other online streaming service to be nominated for an Emmy. The company earned its first-ever nomination for the show Transparent and was nominated for 12 awards overall. Transparent won the Golden Globe for the best TV series earlier this year. It’s safe to say that Netflix isn’t the only online streaming video service that offers critically acclaimed shows anymore.
In the battle over which service has the most titles, that’s not even clear anymore. Most will argue that Netflix has more titles, which would be reason alone to subscribe to the service, but most of it is unwatchable. Amazon’s library is growing rapidly and it’s probably at the point where its good enough to match Netflix’s—or at least it will be very soon.
Offering Prime Video as a separate service is a genius move. It provides another way for Amazon to monetize the service beyond the annual Prime subscription.
But it will also get more people to sign up for the Prime service, too. For an extra $2.00, customers who sign up for Prime Video will also get the perks of being a Prime member, such as free shipping on eligible orders on Amazon.com. It’s almost a no brainer that most customers will probably cough up an extra couple of bucks each month to forego being charged for shipping.
If Amazon really wanted to—and it looks like its headed in that direction—it really could take on Netflix and potentially surpass it in a few years. Amazon is enormous, with vast resources behind it. In 2015, Amazon raked in $107 billion compared to about $6.0 billion for Netflix. Amazon has almost unlimited cash to spend on content, to produce its own programing, and to outbid Netflix for exclusive shows and movies.
The Bottom Line on AMZN Stock
The move to offer Prime Video as a separate service is Amazon’s way to get you into its ecosystem. If a customer signs up initially for the video service, it’s probably only a matter of time before they spend a bit more to upgrade to Prime delivery. Either way, Prime Video is about to take off and that will be a boon for AMZN stock.