Amazon’s Strong Moves to Drive its Success
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Things have been good for the world’s largest online book seller Amazon (NASDAQ: AMZN) and the situation continues to be so as the company decides to enter new market segments as well as strengthen its hold in the existing ones. Recently the company signed a multi-year licensing agreement with cable channel Epix and analysts and industry experts are expecting this move to create some ripples, if not waves, in the online video streaming space.
New Partnership with Epix
With popular movies such as Paramount Pictures’ ‘Iron Man 2’ and ‘The Hunger Games’ from Lions Gate Entertainment under its belt, Epix can prove to be very helpful to Amazon’s online video streaming business and can prove to be fatal for Netflix (NASDAQ: NFLX). Epix is actually owned by Paramount Pictures, Lions Gate Entertainment and MGM, and these huge names of the entertainment universe can aid Amazon’s video streaming service’s growth hugely. Thanks to the dynamics of the market place, till now Netflix was enjoying a head start which it got through its $8 per month unlimited video streaming service. But now, the arrival of Amazon’s Prime Instant Video Service can shake things up and pose as a serious contender for the top spot. The Amazon-Epix deal will help the giant to double its movie library and thus turn more attractive to the movie-buffs.
Netflix recently ended its exclusivity deal with Epix and now it could have a problem on its hands. With this move, Netflix opened the door to Epix for Amazon and the retailing giant jumped in to benefit from the opportunity. Even things haven’t been very smooth for Netflix recently and surely this is not a stock which is at the top of any investor’s mind. The pricing change which the company brought about coupled with few other choices made by the company made Netflix’s stock price drop rapidly. Though the company recovered from all this marginally, this new development is likely to put Netflix back in a poor form. Unless Netflix starts to expand its content offerings, it might lose its market share to Amazon and end up being a company stuck in its days of former glories.
The Launch of the New Kindle
Apart from strengthening its video streaming business, Amazon is also working on capturing a better share of the tablet market too. The company has plans to launch its latest Kindle Fire tablet shortly and has many new plans for the device. The Kindle Fire has the advantage of being less expensive than Apple’s (NASDAQ: AAPL) iPad and this new model might be priced again keeping in mind Google’s (NASDAQ: GOOG) Nexus 7. Some analysts are even expecting the new Kindle to be priced at a mere $150 if a rumoured ad-support model is actually available. If this really turns out to be the situation, Amazon will be benefiting hugely from this low priced starting range as even if the iPad gets a price cut, it will still be far more expensive than $150, thus making it very easy for the Kindle to penetrate into the market.
Amazon is fine with the idea of making minimal money out of the tablet as the main intention of the company is to get the device to as many hands as possible and then benefit from selling higher-margin digital content. Introducing a tablet for $150 can act as another game changer in the space and favor Amazon since the $199 price tag is no longer unique. Amazon is competing with Apple and Google and to make the most out of the situation it's best if Amazon goes after lower priced models.
Unlike the old Kindle Fire, the new model will have mapping software integrated into the device. However, Amazon has decided not to go with Google and instead have partnered with Nokia (NYSE: NOK) for the mapping function. After Nokia acquired Navteq in 2007, it became one of the largest mapping providers in the world, and now Amazon wants to work with the Finnish phone maker to build maps for its tablet. Though the Kindle will run on Google’s Android OS, the company does not want to be dependent on Google even for the maps. The combination of Nokia’s mapping expertise and Amazon’s recently acquired UpNext’s specialization in 3D maps will help the online book retailer to position its product differently. Apart from the new Kindle Fire, Amazon is also all set to roll out its latest e-reader and the company has good expectations from this as well.
Amazon had made an announcement regarding the unveiling and launch of its latest Kindle Fire tablet and yet, just about a month ahead of the launch, the company saw its most popular product being sold out completely. Unlike the situation with the iPhone, where users hold back from purchasing an iPhone in anticipation of the launch of the newer model especially after the announcement has been made, users went ahead and bought the Kindle Fire though they knew that the new model is just a month away. This tells a lot about the product. Because of the huge demand of the existing model, analysts are now expecting even better things from the latest improved version of the Kindle. This, combined with the Epix agreement is making the company a very attractive one for investment. Analysts are expecting that Amazon will post solid stream of revenue going forward and the company should also improve its margins and numbers hugely. Given these developments, I strongly recommend Amazon.
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