Amazon Beats Google, Apple - Analyst Blog

Amazon.com Inc. (AMZN) beat both Google Inc (GOOG) and Apple Inc (AAPL) in the race to provide online storage of media content, including documents, photographs, music and videos in any format whatsoever, enabling anytime anywhere access to all.

Amazon has announced two new cloud offerings, which it referred to as the Cloud Drive and the Cloud Player. The Cloud Drive indicates the secure storage services it is providing at differential rates. The first 5GB is free for existing Amazon account holders, while the next slab (20GB) comes for $20 a year. Additionally, the 20GB would be free for a year for those who purchase an MP3 album from Amazon. For those with higher requirements, Amazon will provide space at additional cost.

Amazon’s Cloud Player comes in two versions, one for the web and the other in the form of an Android app. The web version enables any PC, Mac or Android smartphone with an Internet Explorer, Firefox, Safari (for Mac), or Chrome browser to access the music stored on the Cloud Drive. The reason that the music is not yet available on iPhones is that Amazon has built the system on Abobe Inc’s (ADBE) AIR technology, which is not compatible with the iPhone’s iOS.

Amazon is already incorporating the Android Cloud Player into the Amazon MP3 app for Android, which could enable easy selection and playing of songs, either from the cloud or from the device.

Amazon’s charges are quite reasonable, so there should be early adopters. Moreover, the “free” part of the deal is just enough to entice consumers. We also think that a year’s free subscription for an MP3 album was a great idea. Some consumers could decide to wait for Apple or Google’s service, which may be expected to launch later this year; we think this is probably the reason Amazon put up this offer.

Of course, there is a real controversy regarding the consumption of content from online storage, since it is difficult for music companies and publishers to collect their royalties. As a result, they have opposed it right from the start. Moreover, incompatibility between devices and formats also helped increase sales. The opposition from content providers has been a major stumbling block for both Google and Apple.

In any case, the way the market is developing, we doubt that content providers could win, simply because of the wave of new users that cannot be prevented from consuming songs and videos, irrespective of whether they have purchased them. And if we really think about it, whoever paid a royalty for borrowing a friend’s book or album? It’s just that the lost opportunity is so much easier to track these days.

We have a Zacks #3 Rank on Amazon shares, implying a short-term Hold rating.

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