In Netflix's recent letter to shareholders, the company took an a direct shot at Amazon's move to bundle streaming into Prime shipping subscriptions. Given recent deals, it appears that Netflix's comments must be hanging on an Amazon bulletin board somewhere.
Amazon recently added thousands of films and TV shows, and includes them as a free service to subscribers of its Prime shipping service. We have vastly more streaming content, are available on more streaming devices and are purely focused on subscription video streaming. So far, we haven’t detected an impact on our business from Amazon Prime.
As for Amazon's response, CFO Tom Szultak said on the company's second quarter earnings conference call:
In terms of digital content, we certainly have an offering right now with the opportunity with Prime, we certainly have a product of Prime and video that we like. It’s extremely early but we’re learning customers love it and what they’re seeing so far. We like what we’re seeing so far in terms of some of the metrics but again it’s very very early.
If you combine the two statements, Amazon is a flea to Netflix for now, but the e-commerce company plans to become a player. Amazon's actions speak louder than metric free statements.
The bottom line here is that content costs will be going up for streaming media players. And the No. 1 reason Netflix costs may go up will be Amazon. If there's a race for content libraries, Amazon and Netflix will continue to one-up each other. Those moves will only increase the value of content libraries.
Next up for Amazon will be to secure distribution deals. For instance, Netflix has the Wii staked out, but Amazon doesn't. If Amazon can reach everywhere Netflix does chances are good that there will be a revision or two in future shareholder letters.
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