Amazon's dueling content act will hurt Netflix

Amazon's dueling content act will hurt Netflix

Summary: Amazon and Netflix ink content deals with Disney. These dueling efforts are likely to squeeze Netflix over time because Amazon has more ways to monetize a content deal.

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Amazon and Netflix landed streaming media deals with Disney, but the latter may take the bigger hit over time.

On Monday, Netflix renewed a deal with Disney to keep streaming past seasons of Grey's Anatomy and Lost. Amazon inked a similar deal, but landed Marvel animated series for the X-Men and Spider Man franchises.

As CNET News' Greg Sandoval noted, these dueling deals are just the way Hollywood studios want it. The more players licensing content the happier movie studios and networks become.

In the long run, however, Netflix won't be so happy. Here's why:

  1. Netflix loses any positive momentum from renewing deals if Amazon matches a content agreement.
  2. As Netflix content deals expire or come up for renewal, Amazon is likely to tag along.
  3. After a few years, Netflix and Amazon's streaming service will look nearly identical.
  4. Amazon can then hurt Netflix's margin with a less expensive service and moves to bundle video service.
  5. Netflix doesn't have the operating leverage to match Amazon's lifetime value of a customer equation.

That last point is critical to Netflix's future. Amazon can sell a Kindle Fire tablet for $199 because it will subsidize it with revenue elsewhere. A Kindle Fire owner may spend more on e-books. That owner may also become an Amazon Prime subscriber for the free video. That owner may just buy a flat-screen TV from Amazon and maybe a treadmill later in the year.

Netflix has nothing to match Amazon's subsidy model. Netflix's only hope will be to develop its own programming like HBO or spend heavily for exclusive content. And those two outcomes don't factor in how much marketing Netflix will need just to win customers over from previous management debacles.

Add it up and Amazon may just have Netflix in a vice.

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Topics: Amazon, Browser, Hardware, Laptops, Mobility, Software Development, Tablets

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  • RE: Amazon's dueling content act will hurt Netflix

    I have already spoken to Amazon about their streaming (not completely happy with Netflix content - or lack thereof). They were very upfront that they couldn't match the quantity that Netflix has, but told me that they were working on it as fast as possible. I will be keeping an eye on this until February (when the Starz deal comes up for renewal) and make my decision then.

    Maybe Amazon should just buy Netflix:)
    KNPepper
    • RE: Amazon's dueling content act will hurt Netflix

      @KNPepper
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      passis
  • I'm not buying it

    So your argument is that since Amazon can make money in other ways, Netflix will lose. Yet Apple and Microsoft make "tons of money" in "other ways" yet both saw fit to patronize Netflix on their respective platforms (AppleTV, XBox360). <br><br>If Netflix fails, it will likely be for other reasons, certainly Hastings tarnished the Netflix brand with the bone headed Qwikster idea but more than likely that will fade and Netflix will be harmed by something else.... or it will continue to defy people's prognostications. <br><br>Despite the fact that discs longer will term will go the way of the dodo bird, Netflix having its streaming library on many platforms PLUS discs is a big deal. Specifically having the disc backstore will give Netflix time to solve the "innovator's dilemma". Say what you will about streaming but it's hard to beat a great BluRay 1080p transfer with five channel audio *AND* featurettes to boot (Making of, interviews with actors, etc., etc.). The reason Netflix increased pricing on the disc plans is because it was seeing that discs are going to be here a good while longer. Yes it might be another 6, 7, 8 years, heck, maybe 10, but that's plenty of time. Just juxtapose where Amazon is today to 10 years ago when it still hadn't turned a profit. Like I said, plenty of time to work on the "innovator's dilemma".<br><br>Amazon's Video on Demand is OK but a robust client app is not found on the AppleTV, Playstation3 or XBox360. I have a very nice Windows 7 system but I'm not interested in sitting at my desk to watch a movie via Flash from Amazon's VOD. Netflix got onto the aforementioned platforms because of the leverage it has with consumers, I highly doubt Amazon will suddenly undo that leverage. And going back to what I said as I wrote this missive, if all it took was money, Apple and MS have plenty of it yet Netflix couldn't be ignored.<br><br>-M
    betelgeuse68
    • RE: Amazon's dueling content act will hurt Netflix

      @betelgeuse68
      You're exactly right about Netflix platform support - that's why I went with them. But I'm not interested in mailing DVDs back & forth - I only want streaming (which I can do on my blu-ray player, xBox, WII, or PC - love it). My problem is that, more times than not, when I want to watch something it's only available on DVD (then I end up at the Redbox). If they don't make more content available for streaming, they're going to eventually lose out to someone more aggressive (which Amazon is - and they have the leverage to make plenty of content agreements). And I fully expect to see more platform support for Amazon - I'm looking at a Roku LT for my daughter's Christmas, & it already supports Amazon as well as Netflix and all the others.
      KNPepper
      • RE: Amazon's dueling content act will hurt Netflix

        @KNPepper <br><br>I understand wanting instant gratification, i.e., "I gotta have it now!" but in light of everything that's available on Netflix, Hulu and what I record on Windows Media Center (over the air), I rarely (if ever) find myself in that state of mind. I also check Vudu's 99 cent deal every day. All of the latter give me ample patience for waiting from a disc from Netflix.
        betelgeuse68
      • RE: Amazon's dueling content act will hurt Netflix

        @KNPepper
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      • Amazon won't have it either, then.

        @KNPepper

        If it's only available on DVD from Netflix, it's because the *film studio* of the film/episode made that requirement, not Netflix. Which means that they'll have a similar requirement for Amazon as well: on-demand rental (which is *more* expensive than a Redbox or BBExpress kiosk rental), digital demand (which costs as much as a physical DVD), or buy the DVD/Blu-Ray & get the SD digital download thrown in.

        If I wanted to pay $3-5 to rent a movie, I'll go to a Redbox or BBX & rent *three* movies for the same price, or I'll go to the kiosk 3 times as often. Amazon won't be getting any money from me for a long time, if ever.
        spdragoo@...
    • RE: Amazon's dueling content act will hurt Netflix

      @betelgeuse68 Was just about to write the exact same thing that is in your last paragraph. Amazon can't compete with Netflix until a viewing client is part of AppleTV, Xbox, and PS3 (and as many other Blu-Ray players as possible). Once that happens, look out Netflix.
      spammyman
    • RE: Amazon's dueling content act will hurt Netflix

      @betelgeuse68
      But neither MS or Apple were ever really trying to go head-to-head with Netflix for the streaming space. It makes sense for them to work with netflix in that way. I think the article is spot on as far as these deals leading to a competitive edge for Amazon over netflix, but I do agree with you that Amazon will really need to raise up to Netflix level of platform diversity before they can really take Netflix's place. There are 3'rd party apps that do this, but without the native support it's not the same.
      I wouldn't be surprised if you don't ever see it with Apple though since it looks like Amazon is attempting to compete to become the 'go-to' platform for music/movies etc...(although that's a tough mountain to climb). For other platforms though, I don't see why they can't get a client app out there... that along with their ability to monetize these deals far better than Netflix should be more than enough to push them out... Netflix has made wrong move after wrong move lately- if it Isn't Amazon I wouldn't be surprised if someone else doesn't do it...
      thisnameisok
      • RE: Amazon's dueling content act will hurt Netflix

        @thisnameisok
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    • RE: Amazon's dueling content act will hurt Netflix

      @betelgeuse68
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  • I'm buying it

    Not only will Amazon have its own dedicated devices to view streaming video (the Fire and upcoming larger tablets), but now that they are pressing ahead into video with such vigor we can expect nearly every television and box manufacturer to add Amazon to its client apps. Not only will it be an added value in order to sell their TVs, but think about this: How many of those TVs are sold by Amazon itself? Given how things are going, everyone will want to have Amazon on their side.
    perrybw
    • RE: Amazon's dueling content act will hurt Netflix

      @perrybw
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  • RE: Amazon's dueling content act will hurt Netflix

    Amazon's interface on CE devices is horrible for the prime library. If I am a member and only want to watch Prison Break, I want to tag it in my queue. Is the streaming queue patented in some way by Netflix that Amazon can't duplicate it?
    Bonneville44
    • RE: Amazon's dueling content act will hurt Netflix

      @Bonneville44
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  • RE: Amazon's dueling content act will hurt Netflix

    A big issue in streaming (more so than disc rentals) is "rental" (per use) vs. unlimited plans. Amazon--like cable/fiber service providers--charges pretty hefty fees for on-demand/limited-use recently-released content, while Netflix has no such "video-on-demand" offering but does offer (despite price-gouging and Qwikster stupidity) BD and DVD rentals. It would seem that on-demand pricing better fits content providers' profit goals. The convenience and value of (pretty much) unlimited use pricing fits consumers' interests. I've been sticking with BD/DVD and streaming plans from Netflix, as well as using Amazon Prime streaming (though largely for the shipping incentives), using both services on PC, BD-Player and Xbox. So far, Netflix has the only disc library whose breadth can get me almost any title I want in 1-2 days plus a wider range of unlimited streaming titles (though winning as "not-quite-so-awful" as Amazon's selection). But we'll see if Netflix is able (and willing, at competitive prices) to maintain those advantages.
    Scott Michael
    • RE: Amazon's dueling content act will hurt Netflix

      @Scott Michael
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  • RE: Amazon's dueling content act will hurt Netflix

    Netflix will always have the advantage of a monthly service. Most people aren't going to join Prime.
    trevor@...
    • RE: Amazon's dueling content act will hurt Netflix

      @trevor@... So you're saying paying $96 per year (one month at a time) to Netflix vs $79 per year to Amazon is the better option because prime doesn't have a monthly option. Not sure everyone will see it that way. Especially when you consider the shipping charges that prime can save for non-digital purchases from Amazon.
      Redhooker
    • RE: Amazon's dueling content act will hurt Netflix

      @trevor@... You are just plain wrong, there are already millions of Amazon Prime members before video streaming was ever made as part of the added benefit. The main attraction is the free 2-day shipping for almost anything (even 80-lb Multifunction color laser printer) and no minimum order size (can be a $1 item). I live close to their warehouse so most of my order actually arrived in 1-day. I placed over 100 orders every year on Amazon and for less than $1 per order for umlimited 2-day shipping is a bargain even without the video streaming. With the added bonus of video streaming it is a no-brainer.
      SonofChef