Amazon.com Inc. (AMZN)’s free book-lending service for some users of its e-reader and tablet will increase short-term costs while aiding the retailer’s sales, a Macquarie Capital analyst said.
Amazon, the world’s largest online retailer, said today that it’s starting a digital library with thousands of books that will be available to owners of its Kindle and Kindle Fire devices who have a Prime membership. Those owners can borrow one book a month for free, including more than 100 New York Times bestsellers, the Seattle-based company said in a statement.
“Amazon is currently spending more than $500 million annually on video content,” Ben Schachter, a Macquarie analyst in New York, said in a research note to clients. “Now we have to adjust it even higher for these free book offerings.” By providing more free content, Amazon should increase sales of digital media and physical goods, said Schachter, who rates the company’s shares “outperform.”
Prime is a membership program that costs $79 a year and gives discounts on shipping. In a push to challenge Netflix Inc. and Hulu LLC, Amazon is also offering Prime customers unlimited streaming access to almost 13,000 movies and TV shows.
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