Will Amazon.com, Inc. (AMZN) Dominate Video? – Netflix, Inc. (NFLX), Wal-Mart Stores, Inc. (WMT)

Amazon’s biggest rival in the retail space, Wal-Mart Stores, Inc. (NYSE:WMT), also has a sizable video offering in the form of its VUDU segment. Wal-Mart Stores, Inc. (NYSE:WMT) acquired the on-demand video streaming company, VUDU, in 2010, and now it boasts of having the highest number of HD movies in its catalog. However, almost certainly the video offerings of Wal-Mart Stores, Inc. (NYSE:WMT) represent a small fraction of Wal-Mart’s $443.9 billion sales. And the VUDU offering can be viewed as an add-on to the company’s rapidly expanding e-Commerce footprint. Despite its relative insignificance, VUDU can be a big threat to Amazon as Wal-Mart Stores, Inc. (NYSE:WMT) has 10,000 plus stores serving 200 million customers weekly.

Amazon’s Device Strategy: Content Marketing through Tablets and Ecosystem

With more than 200 million customer accounts, Amazon can tap into its existing user base by selling more Prime subscriptions. Also, the increased popularity of its hardware offerings will provide additional growth prospects for the company’s video content offerings as well. Amazon’s tablet devices are increasingly becoming more and more popular, as the top four best-selling items in the platform are the four Amazon Kindle devices. The company is ramping up its ecosystem further with Kindle Store expansions in countries like Canada, China and Brazil.

The percentage of Prime customers who are watching free content through the Prime Instant Video platform has increased substantially from a year ago. Also, Prime memberships have gone up dramatically on a year-over-year basis, and these consumers are watching their free content and purchasing additional digital offerings as well.

In addition, Amazon is signing video licensing agreements with big name studios like Warner Bros and Turner Broadcasting, and going forward will add original and exclusive content on both Amazon Instant Video and on Amazon Prime Video. The substantial amount of newer and exclusive content offerings should aid in getting more subscribers to the video offerings from Amazon.

Amazon even struck a content deal with Epix, which was a major supplier to Netflix. Amazon is willing to spend big money on landing content deals, as Epix’s deal with Netflix, Inc. (NASDAQ:NFLX) was costing an estimated $200 million annually.

Amazon is also producing original content, just like its video streaming rivals Hulu and Netflix. The original content strategy has worked very well for Netflix, Inc. (NASDAQ:NFLX), as its recent release was well received and generated significant public attention.

Amazon is in the process of producing numerous pilot episodes through Amazon Studios.  It will take the opinions of its subscribers based on the pilot episodes, to decide whether to produce the content or not. The crowd-sourcing process might aid in determining the probability of a TV show’s success, but it might be inaccurate as well. However, original content differentiates the service from rivals like Netflix and Hulu, and the show will be available to the subscribers of Amazon only.

Amazon has stated that users are more likely to frequent its e-Commerce platform when they are enrolled members of Prime. As a result, the company can attribute some of its content costs to its online store, and add more content. Amazon gets to use its original content through three different services, and market it through its massive ecosystem and hardware devices. However, it still faces pretty stiff competition from the category leader, Netflix.

The article Will Amazon Dominate Video? originally appeared on Fool.com and is written by Ishfaque Faruk.

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