Amazon (NASDAQ:AMZN), the giant of e-commerce that has revolutionized the online shopping experience, is making inroads into a new field of endeavor-original programming. The entertainment industry has seen a number of new outlets for shows, including Netflix's (NASDAQ:NFLX) House of Cards and Orange Is The New Black. Amazon has noted this new trend as is reviewing scripts for a number of new series. This development is sure to keep Amazon on the cutting edge of the entertainment/technology interface.
Amazon has always valued the data they collect from their customer's interactions on the site. This information has allowed them to provide an extremely user-friendly Internet experience, products that consumers most desire and customer service that is responsive and efficient. The decision to use the data to produce original programming is, in some ways, logical because they can tap into the demographics and tastes of millions of buyers.
Their 2010 announcement of the creation of Amazon Studios to develop children's and comedy series caused many in the entertainment industry to sit up and take notice. The move signaled the importance of the Internet in providing entertainment to millions of users. It also heralded a move to using collected data to develop programming. Of course, it can be argued that this has been the case since the days of Nielsen, but the database is now much larger and much more detailed in scope. Streaming on smartphones, tablets and game consoles is expected to expand significantly in the coming years, and Amazon intends to be in on this development.
Questions remain whether how well this consumer data can be used to create programs that become popular. In the past, many shows languished for some time before developing an audience of interested viewers. Amazon's development of series pilots may not allow for this time lag in building a loyal following. Original movies also will have to go through an aggressive marketing process. However, marketing online on social media outlets allows greater opportunities to create "buzz," and this method is likely to be used extensively for new programming efforts.
Amazon's move is sure to cause entertainment rivals Netflix and Hulu to step up their efforts to provide original and innovative program for streaming. The Netflix reputation is likely to keep them in the forefront for some time, but investors should never underestimate CEO Jeff Bezos's ability to push forward with new ideas.
We continue to be great customer's of Amazon and rate the stock a buy coming into the Christmas shopping season.
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