No one is doing better with the turn toward streaming than Amazon (NASDAQ:AMZN). Yet streaming is not why you should buy AMZN stock.
According to Axios, there are now 150 million members of Amazon Prime, the company’s streaming service. It’s $10 per month, but it’s bundled with free shipping. Ascribing all its $18 billion in revenue to the streams would mean a business worth $168 billion.
Netflix (NASDAQ:NFLX), with 60 million more subscribers, is worth $224 billion.
But that’s a rounding error next to Amazon’s $1.52 trillion market cap. It may even be a rounding error on Amazon’s streaming revenue. That’s because Netflix runs its services on Amazon’s AWS cloud. Doubtless so do other streamers. Amazon also sells other “media services,” like Amazon Music, Kindle books and Twitch gaming, all from the same cloud.
What’s On?
Beyond this, many streamers, not just Amazon, deliver their services through Amazon’s Fire stick. Its Streaming Stick 4K was the market leader at the end of December, with 13.2 million sold in just three months. Roku (NASDAQ:ROKU) is competitive, but only in the U.S. market.
It all works together. Amazon’s Fire stick can re-sell services like ESPN+ from Walt Disney (NYSE:DIS). The launch of AT&T’s (NYSE:T) HBO Max was stalled by its failure to re-sell on Amazon. Comcast’s (NASDAQ:CMCSA) Peacock service still has that problem. Streamers get global coverage with AWS. All they need do to reach a global market is sell and produce or buy shows.
That’s what Amazon does. I’ve seen some great Indian shows produced by Amazon, although it had to apologize for one. Its El Presidente, a Spanish-language show about soccer scandals, was first-rate. My favorite binge on Amazon right now is a Russian version of Sherlock Holmes, which looks more truly Victorian than any English or American version.
Best Yet to Be
AMZN stock booked $170 billion of what it called “service sales” in 2020. The AWS take of $45 billion was just one-third of that total.
Across the media landscape there are opportunities for growth. Prime Video rides on shipping charges and the Amazon Cloud. Revenues from its other streams is incremental. Amazon runs it all, along with the rest of the business, on operating cash flow, $66 billion worth last year alone. There’s $32 billion in debt, but over $84 billion of cash and marketable securities on the books.
Whatever its streaming rivals might offer, Amazon can do 10 times more of it. It is worth nearly four times more than Comcast and AT&T combined. Even after a full year of streaming success, with 100 million customers, Disney+ is still 50 million behind Amazon Prime, and Amazon could buy it more than four times over.
Amazon doesn’t have to buy out smaller streamers. It can build what they have for less and offer their libraries as well. Billions was a huge hit for ViacomCBS (NASDAQ:VIAC) a few years ago. I’m binging it on Prime. What’s not on Prime can often be found on IMDb, a free streaming service which takes its name from an acquisition it made back in 1998.
The Bottom Line
Everywhere you look in streaming, there’s Amazon. It’s in programming, it’s in access, it’s in the back-end services, and it’s in the cloud. It’s in virtually every streaming niche.
What AMZN stock lacks is a dominant share in any one of them. It has one-third of the cloud, one-eighth of the device market, it’s second in streaming and Disney might soon pass it (when Hulu is included). The whole is worth more than the sum of the parts, meaning a massive break-up is the only risk.
Good thing HQ2 is just outside Washington, then.
At the time of publication, Dana Blankenhorn directly owned shares in AMZN and T.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack https://danafblankenhorn.substack.com/.
