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Amazon.com AMZN is reportedly planning to expand its reach in India, particularly in the Southern part, by offering original regional content in Tamil and Telugu languages.
Per Reuters, India is the fastest growing market for Amazon Prime Video Service driven by popularity of its original content offerings in Hindi and five local languages.
Most recently, the company added Music to its Prime service. Amazon has reportedly partnered with eight national and over 300 regional record labels for providing the music service, which is currently available in only 10 languages.
India Presents Strong Growth Opportunities
India recently regained its position as the fastest growing economy in the world outshining China. According to the World Bank’s Global Economic Prospects in January, Indian economy is likely to grow at 7.3% in 2018. The country is anticipated to register higher growth rate than other major emerging market economies over the next decade.
The improving macro-economic environment provides strong support to the increasing income level of the burgeoning middle-class that enables considerable spending on media & entertainment.
Amazon.com, Inc. Revenue (TTM)
Amazon.com, Inc. Revenue (TTM) | Amazon.com, Inc. Quote
According to a latest report by Federation of Indian Chambers of Commerce and Industry (Ficci) along with consulting firm EY, the Indian media and entertainment (M&E) industry grew 13% over 2016 to reach Rs 1.5 trillion. Further, the M&E industry is anticipated grow at a CAGR of 11.6% to reach Rs 2 trillion by the year 2020.
Moreover, increasing availability of cheap data has increased streaming video usage in India. At the end of December 2017, India had 481 million users, growing 11.34% from 2016, according to a latest report by IAMAI and Kantar IMRB. The number of internet users is expected to hit 500 million by June 2018.
The strong growth prospect presents significant expansion opportunity for Amazon. Although the exact number of subscribers has not been disclosed, the company stated that the Prime service in India has tens of millions of customers.
Streaming Competition Intensifies
Of late, Indian streaming market has become crowded with the entrance of Netflix NFLX, Hotstar, Voot, SonyLIV and many other regional offerings.
According to data from App Annie (published in November 2017), Netflix topped the list of video streaming apps in India for January-June, 2017 period, trailed by Hotstar in terms of revenues.
However, in terms of monthly active users (MAUs) Hotstar topped the list for July-September quarter. Amazon Prime was placed at #4, while Netflix was at #9, only trailed by Tata Sky.
Notably, Netflix’s streaming service costs Rs 500 per month, much pricey than Amazon’s Rs 999 annually (nearly $15).
Amazon is known for its low-cost strategy that is driving its subscriber base in the country. We also believe the latest original regional content expansion plan will boost its competitive position in the long haul.
Zacks Rank & Key Picks
Amazon carries a Zacks Rank #3 (Hold).
PetMed PETS and Stamps.com STMP are stocks worth considering in the same sector. Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for PetMed and Stamps.com are currently pegged at 10% and 15%, respectively.
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