Amazon has a new strategy to capture India's e-commerce market

The e-commerce giant is looking to tap into India's most popular sport to enhance its reach.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

India's over-the-top (OTT) video streaming market is about to take off in the coming years, according to a report by PricewaterhouseCoopers, clocking a compound annual growth rate of 28.6% through 2024, when it is expected to be worth $2.9 billion.

Not surprisingly, there are several contenders looking for a piece of India's video streaming space, as it is currently the fastest-growing OTT market in the world. The likes of Walt Disney Co (NYSE: DIS) and Netflix Inc (NASDAQ: NFLX) have been making aggressive moves in the country, but e-commerce giant Amazon.com Inc (NASDAQ: AMZN) is looking to stay on top in this space.

Let's take a closer look at what Amazon is doing with its Prime Video service in India and why it could be a big deal for the company in the long run.

Amazon makes a smart move to reach more streaming customers

According to third-party estimates, Amazon's Prime Video service is already in a solid position in India's OTT market, with a 20% share. That's equal to Netflix's share and slightly higher than the 17% held by Disney+/Hotstar.

Amazon, however, looks capable of pulling ahead of its close rivals thanks to the addition of live cricket coverage in India. The company recently landed the streaming rights to stream cricketing action involving the New Zealand national team in India for a period of five years, until 2026. What's more, Amazon is open to acquiring more cricket streaming rights, which is not surprising given how popular the game is in India.

The Broadcast Audience Research Council says that cricket attracts 93% of sports viewers in the country. This year, the Indian Premier League (a domestic tournament) saw a 24% jump in viewership, to a cumulative 383 billion minutes. As such, it won't be surprising to see Amazon go after the more lucrative prize -- the Indian Premier League -- when the current streaming rights held by Disney expire in 2023.

It is estimated that Disney's ownership of the Indian Premier League streaming rights could help it exit 2020 with 28 million subscribers, eclipsing Amazon Prime Video's 17 million subscribers and Netflix's 5 million subscribers. This is why it is important for Amazon to bring live sports action -- especially cricket -- to consumers in India.

More importantly, Amazon has the financial firepower to land the big prize, as the Indian Premier League rights were sold for $2.6 billion in 2017. Amazon has already invested $6.5 billion in India so far and has announced a couple of big investments in 2020 to the tune of nearly $4 billion. So, Amazon can be expected to fight for more lucrative cricket tournament rights in India in the coming years.

The bigger play

India's video streaming market may not be enough to move the revenue needle in a significant way for Amazon, given that the company has generated close to $350 billion in revenue over the past year. But it could give consumers another reason to get into Amazon's ecosystem by purchasing a Prime membership, and boost the company's e-commerce business.

Amazon reportedly has around 10 million Prime members in India. The number of Prime memberships could go up rapidly once Amazon doubles down on cricket streaming in India, because of the game's popularity. This could also give the company's e-commerce business a shot in the arm, as the Amazon Prime membership not only includes access to video content, but also gives users access to other services such as faster deliveries for free, music, and gaming, among others.

The bottom line is that Amazon could bring more users into its ecosystem in India with the help of cricket streaming, and that could eventually turn out to be a big number. The number of OTT video users in India is expected to hit 452 million in 2025, indicating that Amazon has a big opportunity ahead of it to boost Prime memberships and e-commerce revenue. That's because Amazon's Prime members reportedly spend more money on the company's e-commerce platform when compared to non-Prime members.

According to a third-party survey carried out in the U.S., Prime members have been found to spend $1,400 on average annually on Amazon as compared to $600 for non-Prime members. As a result, the addition of new Prime members in the coming years thanks to the addition of popular content such as cricket streaming could unlock e-commerce riches for Amazon in India.

Amazon holds around 30% of India's e-commerce market, which is expected to top $100 billion in revenue by 2024. The addition of popular sports such as cricket to Amazon's Prime Video programming could help the company bump up its market share in India and also drive additional spending from customers. So, don't be surprised to see Amazon's move into cricket streaming reap rich dividends for the company's e-commerce business in India in the long run by adding billions to its revenue, both directly and indirectly.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Harsh Chauhan has no position in any of the stocks mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon, Netflix, and Walt Disney and recommends the following options: short January 2021 $135 calls on Walt Disney, long January 2022 $1920 calls on Amazon, long January 2021 $60 calls on Walt Disney, and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon, Netflix, and Walt Disney. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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