Retail drama: Amazon undercuts Netflix
It’s no secret that Amazon.com has had its sights set on Netflix and its subscribers for years. Now, the e-tailing giant has a new plan to achieve its goal. It will offer a monthly subscription plan for its streaming video content for $8.99 a month, a buck lower than that charged by Netflix.
Both Amazon and Netflix have moved into producing original content in recent years, with many of the new shows proving popular with viewers. While it could be said Amazon has been playing catch-up in this regard, the company has achieved success with shows like Transparent which won multiple Emmy’s last year.
The move to a standalone subscription model for streaming videos can also be seen as a means for Amazon to bulk up its Prime memberships. The company will also offer a monthly membership option for $10.99 a month versus the one-time $99 annual fee it currently charges. Prime members currently enjoy Amazon’s original shows and other content at no additional charge.
Perhaps the biggest knock on Amazon’s video is that it does not offer the depth of content that can be found on Netflix. The company has sought to cut into that deficit, having signed deals with HBO and Epix to stream content from those networks.
Mark Mahaney, an analyst with RBC Capital Markets, appears to like Amazon’s chances. He told USA Today, “Amazon certainly has the brand name, the customer relationships, and the focus on high-quality consumer experiences to impact the growth in Netflix’s U.S. subscriber base, and perhaps eventually its global subscriber base.”
Yesterday, Netflix posted earnings that doubled what analysts had been expecting attributed to its subscriber base growing more than anticipated. The company, however, saw the price of its shares fall in after-hours trading after management said it expected the rate of new subscribers to slow. During the first quarter, Netflix added 6.74 million subscribers. During the second quarter it expects to add another 2.5 million as it continues to expand outside the U.S.
- Amazon Ups the Ante on Streaming Video, Challenging Netflix – The Wall Street Journal (sub. required)
- Amazon targets Netflix with standalone video sub – USA Today
- Netflix beats on earnings, but plunges after weak guidance – CNBC
What do you think of Amazon’s monthly subscription plan for streaming video? How do you think it will affect Prime memberships?