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Amazon, Google Collaborate to Boost Streaming Initiatives

Zacks Equity Research

Booming streaming space has given a significant boost to the demand for smart televisions and related products such as streaming media players globally.

Amazon AMZN and Alphabet’s GOOGL Google are leaving no stone unturned to capitalize on this burgeoning need. This is evident from the recent launch of Prime Video and YouTube on each other’s streaming devices. This is the result of their recent collaboration which was announced in the beginning of the second-quarter 2019.

Further, this launch marks the end of competition between both the tech behemoths in the streaming space.

Deal Rationale

The deal seems to be a win-win situation for both the companies.

Per the deal, Google’s Android TV and Chromecast devices along with any partner TVs and hardware will stream Prime Video from now onwards.

Additionally, the search giant is offering free access to Prime Video to users of Chromecast Ultra. All these are likely to drive sales and adoption rate of Chromecast and Android TV, thanks to the content rich portfolio of Prime Video. This will aid the top line of Alphabet’s Google, which currently carries a Zacks Rank #3 (Hold).

Further, the move is expected to expand the subscriber base of Prime due to its increasing accessibility on other devices. This in turn will strengthen Prime Video viewer base as well.

Meanwhile, the e-commerce giant has brought the official YouTube app to its wide array of streaming device which includes Fire TV Cube, Fire TV Stick Basic Edition, second-generation Fire TV Stick, Fire TV Stick 4K and Fire TV Edition smart TVs worldwide.

Further, Amazon which carries a Zacks Rank #3 is gearing up to launch YouTube TV and YouTube Kids on its Fire TV devices in the later part of 2019. Moreover, it is planning to make YouTube available on more of its devices.

This is likely to bolster the user base of Fire TV devices with the support from YouTube which is the most popular streaming app due to free accessibility. Consequently, this will boost the download rate of the app and strengthen viewer base.

Streaming & Devices Market Holds Promise

The latest collaboration makes both Google and Amazon well-poised to rapidly penetrate into the complementary markets of video streaming and streaming devices, as it will help in expanding customer reach in both these markets.

Per a report from Report Buyer, the global video streaming market is expected to hit $124.57 billion by 2025 by witnessing a CAGR of 19.6% over a period of 2019-2025.

Further, a Statista report suggests that this market is expected to generate $24.8 billion in 2019 which is anticipated to reach $28.1 billion by 2023 at a CAGR of 3.2%. Further, worldwide user penetration in video streaming space for 2019 is pegged at 14.5% and that for 2023 is projected at 16.2%.

Additionally, per a report from imarc, the global streaming devices market is anticipated to hit $271.8 billion by 2024 at a CAGR of 16% between 2019 and 2024.

Growing streaming and hardware initiatives are likely to aid Amazon and Google to strengthen their position in these potential markets.

Stocks to Consider

Some better-ranked stocks in the broader technology sector worth considering are Marchex, Inc. MCHX and HealthStream, Inc. HSTM. Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate for Marchex and HealthStream is pegged at 15% and 12%, respectively.

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