underrated – Earlybirds Invest

Amazon (AMZN -8.09%) is best known for its sprawling e-commerce empire, dominant cloud infrastructure business, and its ever-growing Prime membership base. But quietly sitting inside this flywheel is a business with surprising strategic upside: Prime Video.

For years, Prime Video was viewed as just another perk — a nice-to-have feature bundled into the Prime membership. But that’s changing. Between a new ad-supported model, a powerful position in connected TV (CTV), and seamless integration into Amazon’s broader retail ecosystem, Prime Video is emerging as one of Amazon’s most underrated growth engines.

Here’s why smart investors should start paying closer attention.

A young man watching video on his computer screen.

Image source: Getty Images.

Prime Video’s strategic shift from perks to platform

When Amazon first launched Prime Video, it wasn’t trying to compete directly with entertainment companies like Netflix or Disney. Instead, it used video content to increase Prime subscriptions, drive loyalty, and reduce churn. The focus was to delight its e-commerce customers, and that strategy worked. Happy customers became more engaged, spending more time and money on the e-commerce platform.

But what started as a defensive move has become a strategic pillar. Today, in addition to getting free content as Prime members, customers can also subscribe to third-party channels offered by partners under the Amazon Channel. Besides, Amazon made another pivotal move in January 2024: it began running ads on Prime Video, instantly unlocking a massive audience of over 200 million globally to advertisers.

The streaming arm is also increasingly investing in originals, live sports, and localized content across global markets. In other words, Prime Video is quietly building up its ecosystem of services, positioning it well to evolve from a cost-center to a hugely profitable entity of its own.

Amazon Ads and Prime Video

Amazon Ads is one of the next growth frontiers for Amazon, in which Prime Video is going to play a major role.

By rolling out ads across Prime Video by default in key markets, Amazon steps up its monetization efforts of its gigantic Prime subscriber base. Prime members can pay a small monthly fee to go ad-free, but most don’t, turning Prime Video into one of the largest ad-supported streaming platforms globally.

To put the opportunity size into perspective, Netflix has 300 million subscribers, of which 94 million use the ad-supported service. On the other hand, Disney+ has 126 million global paid subscribers. With more than 200 million viewers, Prime Video is already among the biggest streaming services provided globally.

But Prime Video doesn’t run an ordinary advertising business. Its ad engine taps into its vast retail data, letting brands target viewers based on actual purchase behavior. A viewer watching an online video might see a relevant sponsored product ad and buy it on Amazon without ever leaving the app. It’s a frictionless loop that few competitors can replicate.

Owning the connected TV stack

Prime Video isn’t just a content platform — it’s Amazon’s gateway to the living room. And through its connected TV (CTV) footprint, Amazon is building an end-to-end advertising and commerce engine few can match.

Amazon Fire TV, now with over 200 million devices sold globally, gives the company direct control over the connected TV hardware and software stack. This integrated approach allows it to collect first-party data, control the user experience, and serve ads more effectively than most CTV players. While traditional media networks are still figuring out how to merge streaming, commerce, and advertising, Amazon already has all three pieces in place.

The implications are enormous. Advertisers not only reach an engaged, high-intent audience on Prime Video, but they can also close the loop through Amazon’s retail engine. That kind of direct attribution — seeing a sponsored ad on Fire TV, clicking through, and buying the product on Amazon — is a marketer’s dream. With increasing demand for measurable, performance-based advertising, this positions Amazon as a formidable player in the future of CTV.

In other words, Prime Video plays a strategic role in Amazon’s expanding ecosystem, in which commerce, content, and advertising converge to form a defensible business model that strengthens both the parts and the whole.

Now is the time to take a closer look at Prime Video

Investors often think of Amazon in silos: retail, cloud, advertising, logistics, etc. But the company’s greatest strength lies in how these pieces connect. Prime Video may have started as a “nice-to-have” feature bundled into Prime, but it’s quickly becoming one of Amazon’s most powerful strategic assets.

By bringing together entertainment, commerce, and advertising into a seamless flywheel, Amazon is building a future where Prime Video not only entertains–but drives growth across the entire business.

It’s time investors gave this overlooked asset a much closer look.