Watch Out Hollywood, Amazon Is Coming For You Next

Watch out Hollywood, Amazon is coming for you.  Amazon (Ticker Symbol: AMZNWealth Strength IndexAAPL is Extremely Up and trending Up) has been spending billions and billions of dollars, along with HBO, and streaming giant Netflix, (Ticker Symbol: NFLXWealth Strength IndexAAPL is Extremely Up and trending Up) investing in new content for its subscribers. Amazon is new to this space relative to its peers. After investing in solid new content, Netflix began to see a sense of accomplishment with the success of its original shows “House of Cards” and “Orange is the New Black,” winning Netflix its first Emmy Awards.

This spurred Amazon and its Chief Executive Officer, Jeff Bezos, to think fast, creating Amazon Prime Video.   Prime Video would not only show content from other mediums but also it would begin to create its own original content as well.  Amazon had no track record of creating top tier quality content like HBO that has produced global hits like “Sopranos” and “Game of Thrones.”

Amazon has its own strategy and takes on how they want to make and distribute content.  They have a vast network of Amazon Prime subscribers already that enjoy Amazon premium benefits.  The Amazon Prime content strategy has three main channels: Amazon Studios, Amazon Channels, and Amazon Sports. 

Amazon Studios is the main creator and provider for Amazon’s original content and is in direct competition with the entertainment industry for original shows and movies.  It creates content from in-depth storylines for its shows, to a steady stream of feature-length films.  Amazon Studios has had recent success winning its first Primetime Emmy Award with its original comedy, “The Marvelous Mrs. Maisel.”  Amazon Studios has also created critically acclaimed shows like, “Man in the High Castle” and “Jack Ryan.” On a personal note, I have watched “The Marvelous Mrs. Maisel” and it is a very well written and funny show with phenomenal acting done by Rachel Brosnahan.

Amazon Channels is a third party service that provides connections to other content channels.  For example, Prime users can add HBO, Showtime, or Starz for an additional $8.99 a month, where Amazon will get a small cut of the revenue, usually around 25% when a new customer signs up.  This is enabling HBO, Showtime, Stars, and Cinemax to have a global platform to reach an even larger subscriber base that wouldn’t normally be able to subscribe.

Amazon Sports could be the biggest twist of fate for the streaming service.  The live sports streaming service has been dominated by major networks and cable companies.  Amazon is trying to break into that industry.  Last year it locked in a deal with the UFC to air pay-per-view fights.  It also has been streaming Thursday Night Football for the past two seasons, but the rights are digital only and don’t require fans to choose Amazon over regular TV.

Above is the weekly chart of Amazon’s stock price.  As you can see investors have taken a liking to Amazon’s investment strategy.  Over the past six years, investors have realized almost a 1000% return holding Netflix’s stock.

Rich Greenfield, a BTIG media analyst stated that “Amazon will spend up to $6 billion on content this year alone.”  That is a lot of money, but it isn’t near as much as the estimated $15 billion on content Netflix expects to spend this year.  How and when we watch our content seems to be an ever-changing theme. However, Amazon is positioning itself to be a dominant power in content production and now potentially live sports streaming.  So stay tuned to their programming to see if they can win the media war.

 

 


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