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Thursday, December 2, 2021

That’s why Amazon doesn’t have to win the streaming battle

In recent years, more and more streaming providers have poured into the international markets. This creates a battle for market shares, the best in-house productions and film rights. Amazon is one of the leading providers – but the financial profitability of the streaming division is rather in the background.

• Amazon is successful in many business areas – streaming is just one of them
Amazon Prime Video is also boosting sales in e-commerce
• Amazon is less dependent on profits from the streaming area than the competition

Amazon is not a streaming-first company

The company Amazon now operates a large number of different business areas and can therefore point to different sources of income. In addition to classic e-commerce, Amazon offers services for third-party providers, generates advertising income and has a large cloud computing division with Amazon Web Service. Although Amazon began investing in streaming strategies back in 2008, the internet giant isn’t a streaming-first company like Netflix, for example. As a result, Amazon is less dependent on profits from the streaming sector than other providers, according to Bruno Reis and Daniel Martins from TheStreet. Amazon invests a lot of money in in-house productions or in the rights of various sports leagues. Recently, for example, Amazon has secured rights for the Champions League in football. These investments are extremely costly, which is why the operating profit of Amazon Prime Video is only a small part of the company’s profits.

“Golden Globe helps sell shoes”

In 2018 Amazon founder Jeff Bezos said, “If we win a Golden Globe, it will help us sell more shoes”. This quote makes it clear that Amazon Prime Video can be interpreted as a kind of marketing measure. Since the Amazon Prime package not only includes the streaming offer, but also free shipping and, for some products, the delivery guarantee for the next day, streaming customers also become buyers. In this way, demand in Amazon’s online shop is additionally boosted by streaming customers. The higher the number of subscribers, the greater the sales and profits, even if the streaming division only makes a small contribution.

Is the competition a problem?

Netflix, Disney + and Co. try to earn money directly through streaming and their own content, which is why they have to keep the prices for the offers at a certain level. Amazon can afford to charge lower prices since profit margin is less important in streaming. In addition, Amazon Prime is not only booked for streaming, but also by people who only use the e-commerce area or Amazon Music. As a result, competition is less of a problem for Amazon than for the other industry heavyweights.

That’s what the Amazon share does

The Amazon share has been consolidating at a high level for about a year and investors have so far been waiting in vain for the price to break out . There is also increasing speculation about a share split, which would make the share more interesting again for investors with less capital. How things will continue with Amazon shares and Amazon’s Prime Video will also be exciting to watch over the coming months.

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