How Amazon's Media Ecosystem Stacks Up to the Competition

Amazon unveiled its new Fire TV device this week, but it's the company's digital ecosystem that investors should really be worried about.

Apr 4, 2014 at 7:00PM

By now, you've heard that Amazon.com (NASDAQ:AMZN) has officially launched its own set-top box that lets users stream digital video and audio content to their televisions. Priced at $99 a pop, the Amazon Fire TV costs the same as Apple's (NASDAQ:AAPL) rival streaming gadget. Yet it is more expensive than other competing devices including Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) $35 Chromecast and Roku's $50 dongle.

This product launch is exciting for Amazon. However, the e-commerce giant's new hardware is only half of the equation. For investors, the real story is how Amazon's media ecosystem and user base measure up to that of deep-pocketed rivals like Apple and Google.

A crowded market
Amazon has built a vast library of digital media and apps that now includes thousands of movies and TV shows, millions of songs, and over a hundred games. Until now, Amazon's Kindle tablets were the main point-of-sale devices that people used to consume this content. Today, if you purchase a Kindle or Fire TV, for example, you're buying into the complete Amazon ecosystem of digital media. The same goes for Apple's devices and its iTunes media library, as well as Google's Chromecast dongle and Google Play.

Video streaming is now the fastest-growing component of these competing ecosystems. Moreover, it is quickly replacing DVDs as more people choose to stream movies and TV episodes from tablet and smartphone devices. Apple TV currently dominates the U.S. streaming device market with 43% market share, while Google Chromecast grabbed 14% of the market after its debut less than a year ago, according to research from BI Intelligence. It will be interesting to see where Amazon's new Fire TV falls into the mix, once it's been on the market for a bit.

For now, Apple TV has a greater breadth of first-party content than its rivals. Apple TV is also available in more markets around the world than Google Play or Amazon Instant Video. In fact, Apple's media business is estimated to be an $8.5 billion empire, or bigger than The New York Times, Time Inc., and Warner Bros. combined, according to VisionMobile. However, Amazon is hoping to differentiate its ecosystem from competitors' by making a big bet on original content.

One-of-a-kind content is king
Offering exclusive TV and movie titles and introducing original content is one way Amazon could beat Apple at its own game. After all, with so much competition in the space, having a vast assortment of media in one's ecosystem is no longer enough. Apple TV, Chromecast, and Fire TV all offer content from various third-party providers like Netflix (NASDAQ:NFLX), Hulu Plus, Crackle, and YouTube. However, unlike Amazon, Apple and Google aren't producing original content.

Amazon is taking a page out of Netflix's playbook by investing in original content and buying exclusive rights to popular network shows like the Fox hit series 24. Netflix added 2.3 million U.S. subscribers in the fourth quarter thanks to the wild popularity of its original content lineup, which includes shows like House of Cards and Orange Is the New Black.

Netflix House Of Cards

Of course, original series like these cost far more to produce than simply licensing content from third-party providers. For example, 26 episodes of its House of Cards series cost Netflix $100 million to produce. Similar to Netflix, Amazon is also heavily investing in original content these days in hopes of attracting new subscribers to its Prime membership program -- analysts estimate that Amazon Prime now has more than 25 million paying subscribers.

For just $99 a year, Prime members get unlimited streaming access to more than 40,000 movies and TV shows including Amazon original series like Alpha House. Amazon Studios plans to introduce 10 more original shows this year, including Transparent and The After, which will be available exclusively on Amazon Prime Instant Video. While expensive, original content could give Amazon's media ecosystem an edge over Apple's and Google's respective networks.

Video streaming services are just one part of the growing media ecosystems for Amazon, Apple, and Google -- albeit an important part. Ultimately, each of these companies' ecosystems has strengths and weaknesses. However, I suspect original content and exclusive digital media rights will be what set these tech giants' networks apart in the future.

Your cable company is scared, but you can get rich
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 

 

Tamara Rutter owns shares of Amazon.com, Apple, and Netflix. The Motley Fool recommends and owns shares of Amazon.com, Apple, Google (A shares), Google (C shares), and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers