) has inked a licensing agreement with Metro-Goldwyn-Mayer Studios
("MGM"). Per the deal, Amazon will feature MGM's archive of films
and TV shows in 2012 through its streaming video site - Amazon
Prime Instant Video.
The online retailer has been consistently upgrading and
promoting movies and television shows on its streaming video
service. In June last year, Amazon signed a deal with CBS for
broadcasting some of their classics. This was followed by Fox in
September, and by Disney a few months later. This year, Amazon
signed a deal with Viacom in February and Paramount Studios in May,
taking its total number of videos to 17,000.
The latest deal with Metro-Goldwyn-Mayer Studios will expand
Amazon's already-large selection of movies and TV episodes
available to customers as part of their Prime membership. The
subscription cost for the Prime membership is $79 per year. The MGM
catalog includes movies named - The Silence of the Lambs, Dances
with Wolves, Rain Man, and The Terminator, and TV series like
Stargate, which will further position the retail giant to take on
video streaming rival
) through its Amazon Prime service. Prime users can now view more
than 18,000 movies and TV episodes on computers and digitally
connected devices. However, Amazon still lags Netflix in this
regard, since the streaming company has an online viewing library
of 60,000 titles.
We believe that one of the key strategies for Prime Instant
Video should be the expansion of its video archive. Netflix has
seen the benefits of this action in recent times, in spite of its
rate increases. However, Amazon's vast offerings at discounted
rates ($79 per year Prime shipping service versus the Netflix
charge of $95 per year for its streaming video service) could
create a price war in the digital delivery of movies. Amazon's
additional advantage is the stickiness of its customer base, since
Prime offers several other advantages (related to online shopping
for example) that Netflix is unable to provide.
Amazon is one of the leading players in an extremely
fast-growing market. In the first quarter 2012 earnings
announcement made on April 25, Amazon's North America Media
business declined by 14.2% sequentially, which was lower than
expected, thus indicating that the Media segment remains one of the
strongest contributors to growth. Management attributed the
increase in revenue to the growing consumption of digital content
across different categories because of the advantageous value
proposition Amazon was able to provide to its customers.
However, competition from
) through its iBooks app,
Barnes & Noble, Inc.
) remains strong.
Currently, Amazon has a Zacks #3 Rank, which implies a Hold
rating in the near term.
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