Prime potential

amzn stock amazon prime instant video
Sponsored By:

AMZN Stock – Amazon Prime Growth Lost Amid Earnings Focus

Amazon (AMZN) just announced a big multiyear deal with HBO to include The Sopranos, Six Feet Under, Boardwalk Empire, The Wire and others in its Amazon Prime premium service.

amzn stock amazon prime hboAMZN stock didn’t respond dramatically, drifting down a bit on the day and continuing its 2014 slump. AMZN stock is off about 19% this year after poor earnings in January … and judging by the reaction lately, another bad Amazon earnings report could be on the way today.

That’s understandable, since Amazon Prime memberships are still relatively small potatoes compared to the massive e-commerce engine of the bigger AMZN mothership.

However, investors shouldn’t overlook the big potential of Amazon Prime subscriptions long-term as Jeff Bezos & Co. keep adding features to move AMZN stock beyond just e-tailing.

AMZN Stock Needs Prime Long Term

We’ve seen a number of Amazon Prime headlines lately, from news that the company will be raising the price of the service from $79 to $99 a year to headlines about AMZN getting into streaming hardware with its newly unveiled Fire TV set-top box.

This latest headline is perhaps even more important than the other two, because it shows not just growth for Prime but a bit of defeat from a peer. HBO has long tried to insist that you could only get its content by subscribing to the premium channel through your cable service. Sure, subscribers could stream through its HBO Go portal … but the channel was still in charge.

Now, Amazon has paid a pretty penny to break down that wall and has exclusive access to very popular HBO shows … shows that its chief streaming rival, Netflix (NFLX), does not.

That makes a membership to Amazon Prime look much more attractive. And considering that Amazon Prime already boasts “tens of millions” of members and generates hundreds of millions of dollars in extra revenue from the steady drumbeat of subscription payments each quarter, this could help add a much-needed stream of cash to AMZN beyond e-commerce transactions.

Of course, things are less rosy for HBO parent Time Warner (TWX), which has struggled to get its media business into growth move. While rough estimates suggest the multiyear licensing deal with Amazon is worth somewhere between $200 million and $400 million, that immediate payday might come at the cost of future subscriptions.

At any rate, amid Amazon earnings, it’s important to remember the big strides taken as of late to attract and retain more Prime users. Not only will this provide added revenue at $99 per person up front, plugging people into the Amazon video universe will drive increased transactions in the Amazon Instant Video store where you can download TV shows and movies just like on iTunes from Apple (AAPL).

Time will tell how this pays off, but remember amid the short-term focus on last quarter’s earnings that there are big things afoot at Amazon that could affect AMZN stock in the long term.

Jeff Reeves is the editor of and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at or follow him on Twitter via @JeffReevesIP

Get The Slant delivered to your inbox every day!