Roku tumbles on report of Amazon launching free video service

Roku shares sank 4.9 percent on Wednesday on a report that rival Amazon is launching a competing video service that’s free. The Seattle-based web giant is developing a free, advertising-supported video service for the 48 million people who use its Fire TV streaming video devices, according to The Information, a tech news site.
Amazon, whose shares rose 3.4 percent, to $1,998.10, didn’t comment. Roku fell $3.07, to $59.92. Amazon’s service, which reportedly is being developed by its IMDb subsidiary, would compete with Roku and others for a chunk of the $70 billion US advertising business.
KeyBanc Capital Markets analyst Evan Wingren said the TV advertising market is big enough for both companies.
“Anytime Amazon is making headlines around you, investors tend to get concerned. Competition has always been a bear case for Roku … we don’t underestimate Amazon,” he said.
“But the market for streaming advertising is growing. Roku and Amazon are looking to create a lot of inventory for advertisers.”
Such ad inventory is based on data collected from the companies to target consumers. In the past year, Roku’s advertising business has been in the $200 million ballpark, the analyst said, as more consumers opt for TV streaming versus pay-TV.
Morgan Stanley raised its price target for Amazon shares to $2,500 from $1,850, which would boost Amazon’s valuation to $1.2 trillion. Analyst Brian Nowak cited Amazon’s “other revenue” growth, which includes advertising and Prime subscriptions, as central to its “increasingly large, high-margin revenue streams.”
Amazon is in the process of expanding its streaming footprint in order to take on giants such as Netflix.
Earlier this week, Bloomberg reported that Amazon was in talks with Sony and Paramount to offer more movies. Citing anonymous sources, the report said options included development funds, as well as money for film production.
A source told The Post that the talks were merely exploratory, and that Amazon was “putting out feelers” and has yet to develop a solid strategy.