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This Analyst Says Amazon Prime Will Reach 45 Million Subscribers In 2015

This Analyst Says Amazon Prime Will Reach 45 Million Subscribers In 2015
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Walmart's Moat in the US Grocery Market (GuruFocus), Inc. (NASDAQ: AMZN) may not be willing to talk about the exact number of people who use Amazon Prime, but Albert Fried Director of Research Rich Tullo thinks the company is poised for big growth in 2015.

"Amazon is really interesting right now," Tullo told Benzinga. "It looks to me like they are very close to or preparing to approach 45 million U.S. [and UK] subs by the end of 2015. They could be pretty close to it now."

Tullo said that Amazon was at 15 million the last time subscriber numbers were reported.

"About a month ago they said they were close to doubling it," Tullo added. "If you look at the content liability, and assuming the liability is correlated to how many users they have, the content liability is slightly lower than Netflix. I think they're doing a better job of cost management than Netflix [for] some of their originals. If you take that into consideration, I think they're probably really close to Netflix in terms of U.S. subs."

Related Link: Amazon's Q4 Reminds Investors That Competitors Are Still Trying To 'Catch Up'

Free Shipping Vs. Free Videos

Tullo said that he thinks Prime subscribers are attracted to both the instant video content and the free two-day shipping, not one or the other.

"Once they see the platform, I think they like it," Tullo said of those who accepted a trial offer. "I like it, it's easy to use, and it's got a full content offering. It's very synergistic with their business."

Tullo appreciates the variety in Amazon content options. If a video is deleted from its free library, the subscriber can usually buy or rent it separately. By comparison, when a movie or TV series leaves Netflix, Inc. (NASDAQ: NFLX), it is gone for good unless the service brings it back.

Netflix / HBO Success = Amazon Success

Netflix is among the many companies that rely on Amazon Web Services. Tullo said that HBO Go does the same. Thus, if those companies are successful, Amazon still makes money.

"When you look at it in another way, if this business expands to X amount by the end of the year, then they don't really need Netflix to take up any excess server capacity at night because they're doing that internally," said Tullo. "And then by working with HBO [and possibly] CBS on their streaming ends, they're fractionalizing the industry on the other end. That creates additional competition for Netflix while they benefit because they are streaming the content from HBO and they're hosting it. It's really a very, very interesting strategy they've got laid out."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

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Posted-In: albert fried Amazon Prime HBO Go NetflixAnalyst Color Exclusives Analyst Ratings Tech Best of Benzinga


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