New remarks from analysts suggest Netflix, the popular DVD rental and streaming company, will maintain its success even as other companies launch competing services. Recent comments from Amazon CEO Jeff Bezos, however, purport his company's venture into online video streaming isn't rooted in vanilla rivalry or grabbing marketshare.
According to recent statements, both Eric Wold, Research Director at Merriman Capital, and Michael Pachter, analyst for Wedbush Securities, believe Netflix will spend over $1 billion on content deals alone this year - the latter expecting costs may land closer to $2 billion. Nothing to scoff at, sure, but the market leader can handle it. And despite a simultaneous uptick in competition, Wold doesn't think Netflix has anything to worry about on that front either.
"While competitors are increasingly focusing on Netflix's market, we continue to believe [its] lead is formidable and the value proposition is compelling," said Wold this week in a note reported on by Home Media Magazine, adding: "We do not believe having a small piece of the overall content pie available on another platform would be enough to draw away Netflix subscribers — existing or potential."
A study published this week found Netflix eating up over 20% of total North American internet traffic.
It's a good thing then that Amazon, who launched its own online streaming service in February, isn't that concerned with luring away Netflix subscribers - even though one study published soon after the company broke into the streaming space found that it could do just that under the right competitive conditions.
In a candid interview with The Consumerist, Amazon CEO Jeff Bezos explained the true intention of his company's streaming service, deflating (just a little) the notion that he's planning to upend the dinner table and fight to sway tepid Netflix subscribers.
"Renewal rates are extremely high," Bezos said about his company's popular Prime service. "And so we wanted to start to add as people transition from buying DVD to streaming movies and television shows, we wanted to provide some value for Amazon Prime members in that regard. So we left the fee at $79 a year and started adding, and will continue to add...so we're doing deals with, you know, the movie studios and the television networks and so on..."
Bezos cryptically added that Amazon still has "a bunch of things" to unveil in regards to adding value to its $79/year Prime service. If the company truly views its video streaming as a bonus rather than full-fledged competitor, those "things" may end up tied to its recently released Cloud-based music player and Cloud Drive file storage system.
It's quite possible Bezos is simply hedging his bets and playing it cool. Turning away from a huge market that's still growing doesn't make sense, especially when an already popular service (Prime) could be leveraged as a delivery system for new customers.
Do you see Amazon as a potential Netflix rival? Is Bezos really just hedging his bets? Let us know what you think in the comment section.
