Amazon Entices Families With Bundled Content For Kids

by Trefis Team
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Not satisfied with selling content to adults only, Amazon (NASDAQ:AMZN) has now ventured into content for kids. The company recently announced the launch of of “Amazon Kindle FreeTime Unlimited” aimed at kids of ages 3-8. The service gives unlimited access to thousands of titles including exclusive to Amazon Android apps and games. [1] The prices for the services are low at ~$3 per month per child or ~$7 per month per family for Amazon Prime members. Customers who are not Prime members pay a monthly price of $5 per child or $10 per family.

A study estimates that nearly 70% of the tablet owners with children under 12 allow their kids to use the devices for gaming, studying and entertainment. [2] With an estimated 2.5 million tablets shipped by Amazon in Q3 2012 and more expected in Q4, the potential market for the offering is huge. Though the package pricing of the product limits the revenue potential, we expect it to instead make up by attracting large number of families looking for a way to curate content their children are exposed to while saving at the same time. The content bundling could boost sales for the Kindle as the preferred tablet instead of an Apple (NASDAQ:AAPL) iPad or iPad mini.

See our full analysis for Amazon’s stock here

The service offers a bouquet of curated, kid-friendly movies, games and books. It lets kids create their own profiles and control their library. They get to explore content on their own and use their imagination without being dependent. They also get access to separate home screens which isn’t shared and won’t lose their place in a movie/TV show when someone else uses the device.

Parents’ worries have been attended to as they get to curate the content, impose time limits and thus limit their kids’ screen time. The service also does away with advertisements and links to social media which track data and might have led to age inappropriate content. We believe that the bouquet pricing of the service is a clever way to get people to spend more money and free unlimited content will get parents addicted to the device and service.

The company will face competition from Barnes & Noble’s Nook which is popular among parent because of its wide catalog. Apple too would be a competitor as the company through a Netflix (NASDAQ:NFLX) app on its devices offers kid-focused films.

We have a $218 estimate for Amazon which is 12% below the current market price.

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Notes:
  1. Introducing “Kindle FreeTime Unlimited”—The All-You-Can-Eat Content Service Built From the Ground Up Just for Kids—Available Exclusively on the All-New Kindle Fire and Kindle Fire HD, Amazon, December 2012 []
  2. American Families See Tablets As Playmate, Teacher and Babysitter, Nielsen, February 2012 []
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