What's Behind the Google-Amazon Truce in Streaming TV?

Sejuti Banerjea

Alphabet’s GOOGL Google and Amazon AMZN have a truce of sorts. While the two continue to compete in a large number of connected devices, including voice-powered smart home devices and video streaming units, they’ve decided that it makes more sense to come together on some things.

Specifically, this is the ability to stream content over each other’s devices so both Google and Amazon customers have more choice. That’s not to say that it hasn’t been happening thus far. But illegal capture of movies and shows through the Fire TV stick isn’t such a great thing, especially since Europe has already started cracking down on sellers facilitating the theft. And Amazon’s answer of redirecting to YouTube’s web page likely compromised on the quality of videos (the app should support a feature-rich experience and 4K HDR content).

And this simple measure has at once increased reach for both companies. In Amazon’s case, the 100 million Prime subscribers have been much-hyped but the company has been less forthcoming about its video subs. Media estimates place these at 20-30 million, way behind Netflix’s NFLX 137 million. If Amazon wants to get in that league (and there’s nothing in its history to suggest otherwise), it has to buck up with both content and reach.

As far as Google is concerned, the company lags in both content and reach by far. It has just a million subs and 60-70 TV channels depending on where you’re placed although recent measures could extend that significantly to most of the U.S. population.

Content wise, Amazon offers much more than YouTube, including Hulu, Sony's SNE PS Vue (YouTube is already on Microsoft’s MSFT Xbox), AT&T T DirecTV Now and Sling TV, which is a really good deal.

More reach and more content obviously means more ads, which means more money. Netflix and Apple AAPL are different because of their paid model (and there are paid subs on both Prime and YouTube too), but the free, ad-supported tier is something that the duo can capitalize on, especially at the expense of Roku (27 million subs) or Hulu (20 million). Amazon has come up from behind to become one of the largest distributors of ads and the business, along with AWS, is doing wonders for its margins. Google is still the market leader, so it needs to do all it can to maintain share of the expanding pie.

Finally, as Trump would say, blocking one from the other when you are a market leader is an antitrust situation, one that regulators could get involved in sooner or later. So it’s definitely a step in the right direction.

Amazon shares currently carry a Zacks Rank #2 (Buy) while Alphabet shares carry 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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