Are Amazon and Netflix Programmed for Success?

Discussion
Apr 24, 2013

Based on the most recent news, it appears that original and/or exclusive programming is the key to success in the video rental business.

Netflix, which appeared headed for disaster two years ago after botching a change in service and pricing to customers, is back riding high with two million new subscribers added in the U.S. alone over the last quarter.

The key has been the addition of original programming such as Hemlock Grove, House of Cards and Lilyhammer, as well as exclusive deals with movie studios including Disney.

Amazon.com has taken a similar route to expand its streaming video rental business. Although it trails Netflix in total number of titles available for streaming, the company is looking to its own original programming efforts to reduce the subscription gap. Last week, Amazon debuted pilot episodes of more than a dozen programs. The result, according to an Amazon press release, was that eight of the 10 most viewed programs on its service over the weekends were pilots.

"For the past year the Amazon Studios team has collaborated with some of the best actors and writers in Hollywood to produce top-quality shows. Now we’ve handed the remote to our customers to hear what they think," said Roy Price, director of Amazon Studios, in a statement. "In just a few days the pilots have received thousands of helpful and sometimes hilarious reviews."

According to Amazon, 80 percent of ratings it has received on the original programming came with four or five stars.

Is original programming a necessity for success in the video rental business today? What do you see as the relative strengths and weaknesses of Amazon and Netflix as they compete head to head in the streaming video category?

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10 Comments on "Are Amazon and Netflix Programmed for Success?"

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Paula Rosenblum
BrainTrust

It’s not for nothing that Comcast bought NBC. I think that’s called hedging your bets. There is nothing to really prevent Comcast from going all digital, and it will have talent, etc. in place if that happens.

It seems that streaming services may indeed be the successor to cable TV. Towards that end, having more unique offerings is a good idea. When you really think about it, it’s just an extension of the omni-channel shopping experience. The customer wants TV programs when they want them, not when some scheduler wants to schedule them.

Of course, that begs the question “What happens to ad prices when you can’t define ‘prime time’?” and I honestly don’t know.

Ken Lonyai
BrainTrust

It’s hard to say if original programming is a key (long-term) growth factor for any online video rental business. At this point, it’s still very early in the game. So far, original content is working for the big players, but they are essentially following the cable model. When cable was in a big expansion mode, it was infamous for having “500 channels and nothing’s on.” They developed original content and forced consumers to have to subscribe to bigger packages to have access to all they wanted to see.

Amazon and Netflix are becoming two more channels in a fractionalized business. So, in time, consumers may not care as much about original programming and migrate to the provider offering simplicity via the most content in one place. Time will tell….

Max Goldberg
BrainTrust

Content is king. If every video rental/streaming business has the same content, then price and service are the only differentiators. By creating quality original content, Amazon and Netflix are standing apart from their competitors.

One caveat: creating original content can be costly. A few flops can seriously dent the bottom line of even the most well funded companies.

John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
4 years 3 months ago

HBO proved that original content can be game changing. Amazon and Netflix are following that playbook and I believe it will work. Assuming the original content is any good.

The edge Amazon will have is they are offering far more than just original content. It will be interesting to see if loyal Amazon watchers spend more on Amazon. If yes, than original content can not only be a profit center, but drive sales overall for Amazon. Netflix does not have that advantage.

Gene Detroyer
BrainTrust

We are asking the wrong question here. It is not “Is original programming a necessity in the video rental business…?”

Just like we do in retail, we are trying to pigeonhole delivery vehicles. It is old thinking. It is no longer in the hands of the broadcaster, advertiser, retailer, and network. It is in the hands of the watcher, user, and shopper. Today people can take whatever avenue they want to get what they want.

This trend will only accelerate. Those who can deliver what people want, when they want it, will be the winners. It is that simple.

Lee Kent
BrainTrust

I’m not really sure about the future of the video rental business. It begs the question, do I really care who I rent from? It is simply the content that I want and I don’t want to have to jump through hoops or have multiple accounts to get it.

Like the networks competing with each other by pitting their highest rated shows opposite each other. We the people said, we don’t care. We’ll just record them and watch when we want.

These video rental businesses need to stay focused on what the consumer really wants and cares about and not so much on how to best compete. I don’t think we care who wins as long as it’s us! Know what I mean?

Ed Dunn
Guest
4 years 3 months ago

The underlying game-changer is streaming technology. Not only can video be streamed on demand, but business software and point of sale systems can be streamed from cloud servers.

Amazon and Netflix can stream original programming on demand to a diverse consumer base of hundreds and thousands, 24/7 and give production studios a new revenue stream (no pun intended) to promote their creative and short-run works.

There is little upfront cost to Amazon if they are operating on a per-use revenue basis. The most nervous people in the room should be HBO and other premium cable channels that spend years to produce a show that may be hit or miss and presented in a linear fashion.

Tom Redd
Guest

I am with Gene “The Destroyer” of our Trust. Gene thinks like me. “This trend will only accelerate. Those who can deliver what people want, when they want it, will be the winners. It is that simple.”

All this guesswork and wonder is worthless. We have a continually changing style of new shopper that will not settle in on one direction — else they “FEEL” they are missing something.

The video media space will get crazier than the people that have been in retail for over 30 years so, sit back, watch, and wonder at what is a Millennial and how to make sure you are not one.

Next week read about the “Zombie Shopper”. All about how today’s young just head for the noise and then consume.

Doug Fleener
Guest

I can only answer this from my own perspective. I personally rent based upon convenience, selection, and price. We have a zillion channels on Comcast. We get DVDs and stream movies from NetFlix, and we rent at RedBox. Original programing doesn’t currently come into play.

With that said, I’m not the demographic they’re targeting. With more homes “cutting the chord” and going to companies like Aereo who are streaming over-the-air television statements, Netflix and Amazon will be important for alternative programs.

Matt Schmitt
BrainTrust

The driver for creating original programming (not just by Amazon and Netflix, but also HBO and others) was primarily spurred by the need for exclusivity. It’s hard for distributors to stand out competitively when everyone has the same content from studios and publishers.

When doing an ROI analysis of paying for exclusive rights or premiums to get a slight edge on release dates, Netflix and Amazon have determined that investing in original programming makes sense.

When considering the competitive nature of Amazon vs Netflix, it’s hard to see how Netflix can get an edge on Amazon, considering Amazon’s leverage of the Prime Membership approach. Prime members get a bundle of benefits, from free shipping of products purchased to an ever deeper library of “free” video titles from Amazon On Demand. And they have rental and purchase options for titles not included in the free Prime category. It will be interesting to see how Netflix navigates the landscape to look for an edge.

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