Saturday, April 21, 2018

Content Wars as Amazon Edges Close to Netflix's

On Wednesday, Jeff Bezos announced to his shareholders that Amazon Prime had surpassed 100 million subscribers, edging even closer to Netflix's 125 million subscribers. Amazon's milestone comes months after Netflix announcement that it would invest $8 billion in new content and Disney saying that it would remove its content from Netflix to its own streaming site. Unlike the market shockwaves that Amazon's purchase of Whole Foods made in the retail sector last year, investors have so far remained neutral on Netflix. However, Amazon's meteoritic growth makes one wonder how long Netflix has before becoming obsolete.

As it stands, monthly Prime membership costs users $10.99 for up to three screens at the same time, Netflix pricing ranges between $7.99 for a single user to $13.99 for four screens. This means that users are paying comparably the same prices for access to content, hence content wars. At the end of last year, Netflix housed 4101 movies and 2814 TV seasons while Amazon Prime had a collection of 36,412 movies and 6133 seasons of  TV shows. However, from personal experience, Amazon is tough to navigate - Netflix does a better job of curating and organizing its shows. When it comes to original content, Netflix and Amazon are at par or fighting different battles because both sites have competed strongly against the traditional movie industry and scored wins and nominations for Emmy awards and Oscar awards across numerous categories. Amazon Prime, however, has partnered with television providers such as Starz and Showtime in order to provide its users to video channels for additional fees. This is a competitive advantage that Netflix may or may not choose to adopt because it looks like fair game given that Hulu has also made similar relationships with tradition television channels to increase its value proposition.

What Netflix really needs to be worried about are the networking effects offered by Amazon Prime. With Amazon Prime, shoppers getting access to Amazon music, free two-day shipping, Amazon credit cards and very soon added benefits of Whole Foods discounts. Additionally, Amazon has used the infrastructure talent it has on its side to create Amazon Echo that can only be used for the site and tablets that are fed by one's prime account. This means that at $10.99, users get more added benefits on Amazon than they do on Netflix, which explains Amazon's growth. For now Netflix continues to be a market favorite, however as Amazon continues to grow into a networked conglomerate, one wonders whether Netflix should be looking for partners to consolidate/ partner with, such as Jet or Google, in order to to stay competitive against Amazon's play on networking effects.

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