Amazon wants to be a pay TV provider for the Internet age, letting customers add other video services to their Prime Instant Video experience. While this might be good for Amazon, Netflix has the power to beat it at SVOD aggregation.
According to Bloomberg Business, Amazon is in discussions with content companies about launching their on-demand video services within Amazon Prime Instant Video. Prime customers would be able to add these on-demand “channels” to their subscription, in the same way that pay TV customers can add HBO and Showtime. Bloomberg says this arrangement could be realized as soon as next month.
The appeal for content companies is the enormous marketing reach of Amazon, and particularly to the 40M prime members with access to Amazon’s Prime Instant Video (APIV) service. Amazon would also handle the billing. This helps the SVOD services by relieving them of the need to manage credit card transactions, and removing the natural reluctance of customers to provide financial details to a company they don’t know.
This arrangement could be very helpful to Amazon in several ways. Providing lots more content within the Amazon umbrella gives people more reason to use APIV. It helps Amazon in its fight against competing hardware vendors by attracting more content to Fire TV. And, of course, Amazon will get a small revenue boost by taking a percentage of the monthly subscription for these new SVOD services for handling their billing and marketing.
Though this is a great strategic move by Amazon, Netflix is also in a better position to capitalize on this approach and has assets at its disposal that Amazon can’t match.
Reason #1: Location, Location, Location
The Netflix client is on every connected device that consumers buy. The APIV client is not, and Amazon is actually working to alienate providers like Apple and Google by refusing to sell their streaming media players. Not only is the Netflix client on every connected device, it almost always has poll position in the interface appearing on the first screen of whatever app portal the device provides.
Reason #2: A global market
Netflix is already available in 87 countries and has set itself the goal of being available in all 196 by the end of 2016. Amazon simply can’t offer this type of video-specific reach to other services.
Reason #3: More usage means better marketing
Prime Instant Video (APIV) is used far less by its members than Netflix is by its users. 52% of TV viewers with broadband watch Netflix weekly and 27% user the service daily. 19% use APIV weekly and just 6% use it daily. That means Netflix has a daily opportunity to market partner SVOD services to three times as many people as Amazon.
Reason #4: Netflix video platform
Netflix has built out its own CDN and technology for the delivery of video, and it works exceedingly well. Amazon has AWS, which is a general cloud computing platform that provides video streaming services as an application. Were Netflix to allow SVOD partners to leverage its video delivery platform, it likely would be welcomed and could take business away from AWS.
Of course, this is all theoretical because Netflix has shown no sign of wanting to leverage its network to deliver other video services. Perhaps Amazon’s foray into the area will force Netflix to realize it too can benefit from the approach.
Why it matters
Amazon is looking to leverage Prime Instant Video to deliver SVOD services from other content providers.
This is a good move for the company as it helps it and these partner SVOD providers.
However, Netflix is in a better position to do the same thing, though it has shown no sign that it intends to do it.