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Are Netflix and Amazon in an SVOD War?

22 Apr, 2016 By: Stephanie Prange

With Netflix struggling to satisfy stratospheric subscriber expectations, competitor Amazon has made a new move. Amazon is offering for the first time a standalone subscription service not bundled with its popular shipping plan.

Amazon is making its Prime Video subscription streaming service available as a standalone option for $8.99 a month — the same price as Netflix’s entry-level plan. In contrast, the bundled Prime service offers free two-day shipping on myriad purchases with Prime Video and Prime Music included as free value-added perks for about $100 a year.

The fact that Amazon decided to separate out its video service from the bundled plan is a testament to the service’s appeal — and indeed to the SVOD marketplace at large. Amazon now doesn’t just see video as a value-added perk to free shipping, but as a valuable service on its own — on par with Netflix.

Reed Hastings has often said that competition is flattering and good for the SVOD marketplace, and Amazon’s move seems to acknowledge that SVOD services are a viable and important business on their own. As Hastings contends, Amazon’s move ostensibly validates and supports Netflix and its business plan.

There is plenty of room for multiple SVOD services, especially if they feature unique and exclusive content. Many consumers will likely buy into these services (or not) based on the exclusive content they offer. But Amazon has thrown down the gauntlet as well.

“While we don’t think that Amazon will attract many current Netflix customers, we think it is foolish to assume that potential SVOD customers will favor Netflix over Amazon every time,” wrote Wedbush Securities analyst Michael Pachter. “We acknowledge that Netflix has the much more powerful brand for SVOD, but we are confident that once it announced a standalone service, Amazon declared war on Netflix, and intends to back up its new offering with a branding strategy of its own.”

Jonathan Rettinger, president of TechnoBuffalo, told CNBC Netflix has a lot to worry about over the next few months. "Netflix has had an incredible rise, but they need to be looking over their shoulder because there is an onslaught coming led by Amazon," Rettinger said.

For a long time, Netflix has had the SVOD market cornered, but with Amazon moving more definitively into its territory, Netflix may find the road ahead is not so easy.

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About the Author: Stephanie Prange

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