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:)
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:
- Netflix loses any positive momentum from renewing deals if Amazon matches a content agreement.
- As Netflix content deals expire or come up for renewal, Amazon is likely to tag along.
- After a few years, Netflix and Amazon’s streaming service will look nearly identical.
- Amazon can then hurt Netflix’s margin with a less expensive service and moves to bundle video service.
- 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.
Related:
- Amazon’s Kindle Fire economics: A focus on lifetime value of customer
- Amazon: Kindle Fire nuked our Q4 outlook
- Netflix takes profit bullet for UK, Ireland launch: Is it worth it?
- Netflix’s big collapse: Do you believe in streaming, international expansion?
- Netflix’s latest show: When creative destruction attacks
