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California-based Roku is a privately-held consumer electronics company. It mainly deals with consumer digital media products. Its digital media receivers allow customers to stream video or audio via Internet on televisions. It offers both fee-based and free services to its customers.
Amazon’s Cloud Player is a web storage application, which allows people to listen to music from any computer or Android device with Internet access. It allows streaming on devices such as Kindle Fire, iPhone, iPod Touch, Mac and PCs. Amazon does not share the exact numbers, but the Cloud Player has apparently roped in millions of users since its launch in early 2011.
With Amazon’s Cloud Player, customers of Roku can directly access their music collection on their TVs. To make it more attractive, Amazon is offering Roku’s customers free download of the Amazon Cloud Player channel from Roku Channel Store for free.
Previously, Amazon offered its Cloud Player service on the Sonos Wireless HiFi System. However, while the first 250 songs were free of cost, anything over that and up to 250,000 titles required an annual subscription of $24.99 a year.
Amazon is now following Apple’s (AAPL - Analyst Report) model, as it does not charge anything annually, but only for what users download. A song costs around 99 cents in the iTunes store, but is available for playback on any iCloud registered device at no extra cost.
Amazon’s strategy of including Roku makes its service more ambitious. It is expected that this inclusion will bring more users to the Amazon cloud and drive the sales of Amazon’s other digital goods. Therefore, while iTunes still leads in the segment, Amazon’s tactics could help the company gain larger market share.
Amazon’s third quarter revenue was $13.81 billion, up 7.6% sequentially and 26.9% from the year-ago quarter. This was better than management expectations and more or less in line with the Zacks Consensus Estimate. Excluding unfavorable currency impact, revenues increased 30.0% year over year.
Amazon is one of the leading players in the extremely fast-growing retail ecommerce market. While the strong growth prospects are making the market more competitive, Amazon continues to maintain and even grow its share on the back of its consistent and reliable services. Amazon’s diversified offerings, its broad reach and platform approach are the positives.
Both Amazon and Apple have a Zacks #3 Rank, which implies a Hold rating in the near term.
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