Amazon (AMZN  ) is aggressively growing vertically and horizontally with remarkable success. At one time, the dominant belief was that businesses should stick to their niche, and it was concerning when companies entered new markets or new industries. Amazon has defied this conventional wisdom as it's successfully expanded from an online seller of books into selling all types of products, cloud computing, logistics, streaming, electronics, and content to name a few.

Now, Amazon is gearing up to enter the video game market with the release of its first big-budget game, "Crucible". Crucible is free to play, but it sells digital products within the game. It's expected to follow up this with two more major releases later this year including "New World" and an untitled game based on "Lord of the Rings".

Amazon Games

Amazon is expecting to launch its own video game streaming service sometime next year, and these games will form the foundation of this service. The company seems to be following the same model as Prime Video, where it bundled original content and older content. The service attracts subscribers on its own, but it also serves as a complement to Prime customers who are increasingly the backbone of Amazon's e-commerce engine.

Amazon wants to keep people in its ecosystem, because then they're more likely to use it for shopping which makes its ecosystem even bigger. The company is now extending this to videogames. Ultimately, the quality of its video games will determine its success, but if the games are well-received, it will help Amazon Games attract new talent and users. Unlike many new games that struggle for oxygen, Amazon has Twitch and its 150 million Prime subscribers who will help this division's initial push.

Long-Term Potential

Video games are another "platform" of sorts, where users spend long periods of time. For younger people, it serves the same function as social networks and has become a way to hang out with friends. Video games are taking an increasing share of the entertainment category when compared to TV or movies. Currently, monetization levels are low compared to online social networks or TV, but it's catching up.

Amazon is surely aware of these trends as it owns Twitch which is the biggest video game streaming platform and has 40 million users in the U.S. Total hours watched on Twitch increased by more than 10% in 2019 vs 2018. Amazon Games is an attempt to be a part of this exploding market but it will face stiff competition from incumbent video game hardware and software companies.