Netflix Original or Amazon-Viacom: Diverse Strategies

By Bob Wallace June 06, 2013

While Amazon’s huge-ticket licensing deal with media giant Viacom this week provides its streaming service children’s and comedy programming channels that Netflix subscribers no longer have access to, this move lends clarity to the strategy of the two competitors.

Consider this: Market leader Netflix is spending $100 million alone on original programming in creating House of Cards with Kevin Spacey for its service. Amazon, by contrast, is spending double that for not-original children’s and comedy programming – a category Netflix already has addressed.

Image courrtesy of Shutterstock

Netflix launched another original series, horror thriller Hemlock Grove, in late April as further proof of its original series focus. The streamer already boasts Arrested Development, which originally launched on Fox. Netflix launched 15 new episodes on May 26.

The reality here is that original programming and live sports trump all else as had been evidenced by the original series content efforts of the once-movie channels and now pay-cable TV channels such as FX, AMC and USA. It’s better to focus on new series, exclusive to your OTT service than to secure content that can be found easily elsewhere.

Amazon: Streaming Plus

While Netflix has been there and is doing that, Amazon Prime is playing big-time catch up in programming and customer base. Amazon can narrow the customer base gap some by continuing to offer deals on its non-streaming products and consumer electronics device trials that Netflix lacks.

Where Amazon wins is in the overall revenue category, as it claims users of its Prime service spend twice as much on non-streaming merchandise as those that don’t use Prime. The streaming package includes more than video programming which enables easy cross-selling, something Netflix lacks.

Prime contributes about one third of Amazon’s operating income according to a Morningstar research report issued earlier this year.

Primes costs about nine times more a month than Netflix but includes/included extras such as two-day shipping, free trials on Kindles and free e-books. The Kindle promotion alone has been widely credited for the recent boost to 10 million subscribers for the e-commerce kingpin. Prime’s customer base is expected to hit 25 million by yearend 2017, according to Morningstar.

Netflix: Beyond Streaming Service?

Given the assets that comprise Amazon Prime, what, if anything, should Netflix do to expand beyond its streaming service brand and build related revenue? And if that’s part of the plan, whom does Netflix partner with or acquire to broaden its package?

Adding an e-commerce menu that competes at any level with Amazon, would be the heaviest of lifting. Netflix may be content and solely focused on forging on as a single product-line business. It hasn’t shown signs of entering adjacent spaces to date, with the House of Cards effort it’s most relevant initiative.

Winning or Losing?

Netflix is no newcomer to losing content to competitors and upstarts as was witnessed when its contract with Starz expired. The same applies for MGM and Warner Brothers, the latter of which is aiming to launch its own streaming service.

The disruptive innovator has preferred exclusive programming deals which has often run counter to content owners’ interest in making potentially more money by doing the opposite in an expanding streaming video service industry segment.

The loss of movies and TV shows from Netflix’ content library hasn’t yet delivered a hard hit to it business or customer base. This raises the question of how big a content library do you need to have to keep subscribers happy at the monthly price you charge?

For the meantime, Netflix is firmly focused on original content while competitors are fixed on just adding content.

Edited by Rich Steeves

VP of Content

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