Netflix owes part of its stranglehold on the commercial instant streaming market to a massive selection, estimated at over 30,000 shows and movies. If other companies hope to compete, they need to secure more content deals according to research group IHS iSuppli. Can Amazon play catch-up, or is it too late?
IHS Screen Digest's Laura Aguilera admitted that Amazon's initial shot at Netflix was far from flawless.
Known more as an online marketplace, Amazon added instant streaming to its Prime service in February. Customers who pay $79 per year for free product shipping received the perk for no extra charge. Non-Prime members can still access 100,000 movies and TV shows, but strictly as rentals or purchases. The company broke into video on-demand years ago, though on a transactional-only basis.
"For Amazon, launching Prime Instant Video created a way to get its most active users to spend more time on its site by freely 'giving away' content - though in reality, the video service is already paid for," wrote Aguilera.
The popularity of Netflix and Hulu, as well as burgeoning efforts by cable TV networks such as HBO, also complicates Amazon's struggle said Aguilera, who believes the company's future success hinges on what it can offer consumers. To that end, she applauded Amazon's recent content deals - even if Netflix's roster still trumps it.
This summer Amazon landed rights to both CBS and NBC Universal programs and movies. The CBS deal covered shows such as "Medium" and "Cheers," while the NBC Universal agreement added movies "Eternal Sunshine of the Spotless Mind" and "Babe." Amazon confirmed last week that the two deals pushed its instant streaming selection to 9,000.
Another hurdle for Amazon is Netflix's success on devices that aren't PCs - specifically, video game consoles. "Netflix is present on games consoles, which in 2011 account for more than 55 percent of all living room devices actively connected to the Internet in the United States; Amazon is not," wrote Aguilera.
The Nintendo Wii received Netflix support just last year, while PlayStation 3 owners could connect in 2009. Netflix streaming hit the Xbox 360 first in 2008.
Aguilera pointed out that the two companies may duke it out overseas in the near future. Amazon's acquisition of LoveFilm, an online movie subscription service in England, could rain on Netflix's eventual UK parade. Recent insider statements suggested that Netflix will launch in Europe by next summer. A Latin American roll-out is slated for this fall.
Overall, Amazon has its work cut out for it.
"This is part of a necessary transition strategy for Amazon as it tries to move an established physical media business onto digital entertainment, and it makes sense that the company start with its most valuable customers," explained Aguilera. "Already, Amazon Prime members have been shown to drive two to three times more purchases than the average Amazon shopper. What is less clear, however, is whether a natural overlap exists between Prime subscribers arguably concerned with savings on delivery for physical products beyond just video entertainment, and customers for whom instant video streaming carries significant value."
