The CEO failed to understand that narrowing a brand’s focus to mean “one thing” would have meant the difference between winning major content deals with the likes of Time Warner and Walt Disney.
In theory, it wasn’t that Walt Disney and Time Warner weren’t given a large enough of an amount of money, but rather, the business interests of Walt Disney and Time Warner coincided better with Netflix, Inc. (NASDAQ:NFLX) because Netflix brought a fuller and more unifying movie watching experience than what Amazon Prime Video could provide.
Yahoo! has a stronger strategy than Amazon
Yahoo! Inc. (NASDAQ:YHOO) is in talks to buy out Hulu. I estimated that acquiring Hulu would cost in excess of $2 billion.
Marissa Mayer’s strategy in movie streaming by buying out Hulu is stronger than Amazon, because Hulu already has a large content library (not as big as Amazon or Netflix, Inc. (NASDAQ:NFLX)), but at least it has one. It also has a user base of approximately 4 million subscribers, giving Yahoo! Inc. (NASDAQ:YHOO) an effective base to grow from, and if Yahoo! Inc. (NASDAQ:YHOO) was to expand Hulu’s services in key international markets, it can actually carve out a niche for itself while co-existing with Netflix. Something Amazon may not be able to do because Amazon’s intent is to compete directly with Netflix, whereas Hulu focuses more on TV shows and a narrower target market.
If Yahoo! buys out Hulu, it is unlikely that Yahoo! Inc. (NASDAQ:YHOO) would risk changing Hulu’s brand name into Yahoo! Inc. (NASDAQ:YHOO) Hulu, or pull a brand-extension stunt that could hurt the company’s performance. Imagine if every Procter & Gamble product had the name Procter & Gamble in it, would you honestly be able to distinguish the difference between Olay, Vicks, Tide, and Listerine if the brand name Procter & Gamble was in each of these different products? Having separate brand names help consumers to differentiate products and services, which is why Hulu could be the best investment decision Yahoo! Inc. (NASDAQ:YHOO) could make in light of its current financial position.
Conclusion
I believe that Amazon.com, Inc. (NASDAQ:AMZN) Instant Video will not be able to make any significant advances into movie streaming over the next ten-years. Netflix, Inc. (NASDAQ:NFLX) is more heavily focused on committing resources into the streaming business than Amazon is. Netflix is not focused on its bottom-line, but rather increasing the amount of cash generated from operations which is exactly why Netflix can stand toe to toe with Amazon. The CEO of Netflix has shown time and time again that it will never sacrifice long-term profitability in favor of short-term gains, which is why Netflix seems to be the best investment opportunity.
The article Does Amazon Stand a Chance Against Netflix and Yahoo? originally appeared on Fool.com and is written by Alexander Cho.
Alexander Cho has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Netflix. The Motley Fool owns shares of Amazon.com and Netflix. Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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