Should Amazon challenge scare Netflix?

Share this content:

E-retail giant Amazon.com said this week that it's getting in the streaming video game, offering through-the-Web movies and TV shows for no additional cost to members of its $79-per-year Prime service.

Industry observers disagree on how the move will affect Netflix, the current video streaming king of the hill. Netflix said in January that its Q4 2010 revenue jumped 34% year-over-year after it introduced a streaming-only subscription option. The Los Gatos, CA-based company said it added 3.08 million subscribers in Q4 despite cutting its marketing 10% in the quarter.

Macquarie Capital analyst Ben Schachter told Bloomberg Businessweek that “the bottom line is that this offering from Amazon will not likely cause much of an exodus from Netflix in the beginning.”

However, Eric Savitz at Forbes' The Tech Trade blog noted that Needham analyst Charlie Wolf downgraded Netflix's stock rating this week because of Amazon's move. “There was no catalyst to trigger a downgrade of the stock,” said Wolf. “The catalyst arrived in the form of a free-streaming video subscription service from Amazon.”

The Netflix-Amazon argument boils down to content versus price, plus the overall value of Amazon's Prime, which is slightly cheaper than a year-long streaming-only Netflix subscription. Business Insider's Pascal-Emmanuel Gobry noted that “Yes, with Netflix you can get a bigger library of streaming content (estimated around 20,000 movies/TV shows). But what are the odds Amazon doesn't expand its library? And with Amazon, you also get free shipping on physical goods – a pretty sweet bonus.”

On the other side, PCWorld's Ian Paul explained that “on paper, Netflix's selection of about 20,000 titles beats out Amazon Prime's 5,000 titles, but there's a chance Amazon Prime could have the same popular titles as Netflix, right? Wrong. Amazon Prime's selection isn't even close. A quick survey of Amazon's ‘Prime Eligible' pages for movies and TV shows reveals a dismal lack of popular and recent titles.”

There does seem to be consensus that Netflix and other streaming services have left kiosk-based platform Redbox in their dust. Anthony John Agnello said on InvestorPlace.com that “Redbox does have something those other fledgling streaming services don't, thanks to the strength of the Redbox brand.” Yet he added that its “success likely won't translate to its streaming business – at least not without exclusive content and competitive pricing.”

Said Agnello: “The market is too crowded for Amazon, Redbox or any of the others to find an audience. Why get into the business when 20 million consumers already have Netflix?”

DMNotes is DMN's around-the-clock blog. Yes, a blog in 2016.

Bookmark this section and follow our RSS Feed here

Sign up to our newsletters

Company of the Week

Brightcove is the world's leading video platform. The most innovative and respected brands confidently rely on Brightcove to solve their most demanding communication challenges because of the unmatched performance and flexibility of our platform, our global scale and reliability, and our award-winning service. With thousands of customers and an industry-leading suite of cloud video products, Brightcove enables customers to drive compelling business results.

Find out more here »

Career Center

Check out hundreds of exciting professional opportunities available on DMN's Career Center.  
Explore careers in digital marketing, sales, eCommerce, marketing communications, IT, data strategies, and much more. And don't forget to update your resume so employers can contact you privately about job opportunities.

>>Click Here

Relive the 2017 Marketing Hall of Femme

Click the image above