Investors know all too well to steer clear of companies that are in Amazon\u2019s crosshairs.<\/p>\n
In fact,\u00a0Amazon\u00a0doesn\u2019t even need to actually disrupt a new business to spook the markets.\u00a0All it takes\u00a0is a press release that indicates that the online giant is considering moving into a new space \u2014 be it healthcare or home improvement or groceries or real estate \u2014 and the shares of leading companies in that industry will almost assuredly take a hit. This phenomenon is so common that it has a name: the Amazon Effect.<\/p>\n
But if that\u2019s the case, should shares of companies that Amazon can\u2019t defeat be expected to soar?<\/p>\n
That theory hasn\u2019t been put to a broad test, as there haven\u2019t been that many examples of companies crushing Amazon. However, there is one major industry where Amazon hasn\u2019t been able to bully the current leader, as that company \u2014\u00a0Netflix\u00a0\u2014 has actually been the one doing the real disrupting.<\/p>\n
As a result, Netflix shares have been on a tear.<\/p>\n
The streaming media giant\u2019s stock has doubled in price through the first half of 2018, after growing 390% in the past three years. And recently, analysts at\u00a0Bank of America\u00a0raised their \u201ctarget price\u201d for Netflix stock to $460 a share, meaning they think the stock could rise another 18% above Netflix\u2019s current value.<\/p>\n
\u201cWe think Netflix can become the dominant streaming player in virtually all markets,\u201d wrote Nat Schindler in his note,\u00a0according to CNBC, in which he refers to Netflix as \u201cthe king\u201d of streaming media.<\/p>\n
The implication: The 800-lb. gorilla \u2014 Amazon \u2014 known for toppling bricks-and-mortar retailers, book stores, and groceries, appears to finally be outmatched.<\/p>\n
But how is it that Netflix has been able to do that?<\/p>\n
Conventional wisdom says that Amazon doesn\u2019t do anything for second place. Amazon CEO Jeff Bezos\u00a0reportedly spent\u00a0$250 million to secure television rights for the\u00a0Lord of the Rings<\/em>\u00a0franchise, in order to create a series that could cost $100 million to produce a year. It\u2019s an attempt to develop Amazon\u2019s own\u00a0Game of Thrones.<\/em><\/p>\n Clearly, with that type of investment, Amazon wants to provide quality content that will attract eyeballs. And with $178 billion in revenue, it\u2019s not as if Amazon doesn\u2019t have a war chest to tap.<\/p>\n But Netflix\u2019s easily outspends Amazon for content. In 2018, Netflix expects the budget for non-sports programming to\u00a0reach $8 billion\u00a0while Amazon\u2019s sits around $5 billion.<\/p>\n What all this spending and commitment to the single purpose of delivering quality streaming media has gotten Netflix is similar to what Amazon has earned in shipping: Goodwill from customers.<\/p>\n Netflix has a long-term target of using original programming for half of its content.<\/p>\n Since shows like\u00a0Stranger Things\u00a0<\/em>and\u00a0Orange is the New Black<\/em>\u00a0drive signups, Netflix took steps towards improving its original programming years ago.<\/p>\n Amazon, with the development of Amazon Studios, is trying to catch up, but it has a long ways to go. It has also had a number of\u00a0missteps\u00a0in hiring the right talent for Amazon Studios in order to ensure it reaches Netflix-esque quality.<\/p>\n Consumers still side with Netflix. A\u00a0Morgan Stanley survey\u00a0found that 39% of viewers said that Netflix has the strongest original programming among subscription video providers. HBO came in second. Amazon Prime Video stood third, with just 5% of consumers siding with the retail giant.<\/p>\n When you think about it, Netflix should be leading the way when it comes to streaming video content \u2014 at least against Amazon. Netflix\u2019s business plan, after all, is entirely focused on streaming. That\u2019s not the case for Amazon.<\/p>\n Jeff Bezos\u2019s company uses streaming as an add-on to encourage customers to sign up for Prime memberships. The heralded two-day shipping program, the backbone to much of Amazon\u2019s success, squeezes more sales and retention from Prime customers.<\/p>\n Consumer Intelligence Research Partners\u00a0estimated\u00a0that Prime members spend $1,300 a year, while non-Prime members spend $700. That $600 difference adds up quickly when you\u2019re talking about 90 million U.S. Prime subscribers.<\/p>\n Amazon\u2019s streaming service is a tool used to attract and retain Prime subscribers, although it isn\u2019t clear how much retention video actually creates. Still it\u2019s not the driving ethos of the company. And Netflix is taking advantage of that fact.<\/p>\n <\/p>\n http:\/\/time.com\/money\/5327727\/this-is-the-one-company-that-amazon-cant-disrupt\/<\/p>\n#2: Netflix Is Laser-Focused on Content
\n<\/strong><\/h2>\n#3: Netflix Understands Its Enemy<\/h2>\n