Monday, January 31, 2011

Now Is The Perfect Time For Amazon To Attack Netflix (AMZN, NFLX, AAPL)

Jeff Bezos

It appears that Amazon is finally about to attack Netflix with a subscription-based video streaming service.

Screenshots posted over the weekend suggest that Amazon is designing, testing, or ready to roll out a service for its Prime members, which could be expanded later.

That's smart -- now's a great time to do it.

In this post, we'll explain:

  • Why now is the perfect time for Amazon to attack Netflix.
  • What Amazon needs to do to be a serious threat.
  • What Amazon's attack could mean for Netflix.

Why now is the perfect time for Amazon to attack Netflix: It's far enough into the streaming era that Amazon wouldn't have to build out a DVDs-by-mail rental service

Only about one-third of new Netflix subscribers pick the new streaming-only plan, Netflix reported in its earnings material last week. But that percentage will grow.

And streaming is already bigger than DVDs in "hours of entertainment delivered," according to Netflix.

Sure, Netflix will have an advantage over Amazon with its DVD library for many years. But there is no sense in Amazon building out that infrastructure to compete. (Especially because of all the new states Amazon would be forced to start charging sales tax in, a big no-no.)




Plus, there really isn't much competition in the subscription-based streaming business


Everyone and their uncle offers new releases on-demand, including Amazon itself.

But subscription-based streaming seems to be a nice, unique business model for Netflix, even if it means lower quality titles, old movies, obscure documentaries, etc. Apple and Microsoft haven't made a move here yet. And Hulu Plus is much more focused on TV stuff (and is much more limited that Netflix).

So Amazon is in a good position to be a strong no. 2 in this market.




And Netflix has big lead, but it's not insurmountable


Sure, it has 20 million subscribers. But not 100 million.

Most people in the U.S. still don't stream videos to their TVs. Arguably, most people in the U.S. will someday. So it's still not nearly too late for Amazon.

And besides Apple, Amazon arguably has the best brand recognition to do this. Especially with all the credit cards it already has on file; one-click commerce; Prime members; etc.




View more at Business Insider





Now Is The Perfect Time For Amazon To Attack Netflix (AMZN, NFLX, AAPL)


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