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Amazon Ups Ante in Gaming Space With Leyou Partnership

Zacks Equity Research

Amazon AMZN is teaming up with Hong Kong-based Leyou Technologies, a game developer, in a bid to disrupt the gaming space.

Per the terms, Amazon Game Studios will develop a free-to-play online multiplayer (MMO) game based on J.R.R. Tolkien’s The Lord of the Rings, jointly with Leyou Technologies and Middle-earth Enterprises. Notably, the game will be playable on PCs and gaming consoles.

The partnership will leverage Leyou’s expertise in designing free-to-play games and operating live-service games, and the power of Amazon’s game technology and talented MMO developers in making the new game.

Meanwhile, Amazon will take care of marketing and operations of the game in countries other than China and Taiwan where Leyou will be in charge of these.

However, the game will be completely different from The Lord of the Rings series which is yet to air.

We believe the latest move is likely to help Amazon in gaining momentum across fans and readers of this iconic epic fantasy novel.

Competition in Video Game Market Heats Up

Notably, the move is expected to strengthen Amazon’s presence in the gaming industry which as per a report from Newzoo, is anticipated to reach $180.1 billion by 2021.

Additionally, the gaming market generated revenues worth $136 billion in 2018, per an IDC report, which reflects that the figure is growing at a rate of 15% every year.

Further, according to a report from GlobalData, the video games market holds the potential to reach $300 billion by 2025.

Hence, Amazon is well-poised to rapidly penetrate this booming industry, thanks to its efforts toward bringing a game based on The Lord of the Rings.

However, it would foolish to ignore the advances being made by companies which include the likes of Nintendo NTDOY, Netflix NFLX and Electronic Arts EA, to name a few. These companies can provide serious competitive threat to Amazon as these are also making every effort to reap benefits from this potential market on the back of their strengthening gaming portfolio.

Netflix is gearing up to launch its long-awaited video game, Stranger Things 3: The Game based on its hit original series, Stranger Things.

Further, Nintendo, the maker of Pokemon and Super Mario, offers offline and online games through hybrid console, Switch. Further, the company has partnered with UbiSoft to stream Assassin’s Creed Odyssey on Nintendo Switch in Japan.

Electronic Arts, a leading developer, marketer, publisher and distributor of interactive video game software and content, is best known for its work on console games based on Peter Jackson movies.

Amazon.com, Inc. Revenue (TTM)

Amazon.com, Inc. Revenue (TTM)

Amazon.com, Inc. revenue-ttm | Amazon.com, Inc. Quote

Amazon’s Aggressive Stance

Nevertheless, Amazon’s growing initiatives toward making interesting games are likely to provide a strong competition to the above-mentioned contenders.

Apart from the latest move, Amazon Game Studios is also working on a sandbox MMO game, New World. The game will be set in mid-1600s in a fictional landmass in the Atlantic near Bermuda where players will have to forge their destiny in a new land.

Additionally, Amazon owns a huge game portfolio and offers video game streaming services via Twitch platform.

All these initiatives are likely to aid its position in the gaming industry.

Currently, Amazon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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