The battle to become king of streaming content in the U.S. continues to heat up. While Netflix has the higher subscriber number and gets the headlines, Amazon is gaining steam through its Amazon Prime Instant Video segment.
For $79 a year (which translates to $6.59 per month, compared with Netflix’s monthly per-sub fee of $7.99), Prime subscribers receive free two-day shipping on almost all Amazon products. As an additional part of the Prime service, they enjoy unlimited viewing of the more than 41,000 movies and television shows on the site. This year has seen considerable growth for the Prime library, which finished 2012 at approximately 30,000 titles.
While Netflix and Prime are both SVOD services that bid against each other for content, they are different in one crucial respect: While the monthly fee is the raison d’etre of Netflix, the video piece of Prime is really only a fringe benefit; there isn’t any available data as to just what percentage of the Prime crowd even uses Instant Video. (A Bernstein Research survey in July found that 29% of Prime subs don’t use the video option.)
Coincidentally or not, Netflix is seeing its dominance as the No. 1 streaming service in the U.S. erode, according to NPD Group. In the first quarter of 2013, 67% of U.S. streaming customers subscribed only to Netflix — a significant drop from the 76% posted in the first quarter of 2012. Hulu Plus scored 10% of total SVOD subscribers among those who used only one service, while Prime made up just 2% of such single-source users.
In the same NPD Group study, 10% of viewers used Netflix and Prime both for streaming movies and television shows. Eight percent used Netflix and Hulu Plus.
All of these services have begun investing in original programming, a tactic that stole the focus from content licensing in the subscription VOD category this year. Netflix successfully introduced multiple series, including “House of Cards” and “Orange Is the New Black,” while Amazon ordered a string of series in the comedy and kids genres.
But all that activity has obscured the fact that competition over licensing has intensified during the same period, as both Amazon and Netflix seem to have moved away from an earlier emphasis on building the most comprehensive libraries to focus on snaring exclusive pacts that help them stand out in the marketplace.
Amazon wasn’t particularly aggressive on that front until this year, making a number of deals that either outbid Netflix or snapped up content its rival was willing to relinquish. The flurry started in January with a huge cache of content from A&E Networks, followed by more targeted strikes at shows, including PBS’ “Downton Abbey.” The company also inked broad pacts with PBS, NBCUniversal and Scripps in 2013.
Perhaps the most distinctive deal came in February, when Amazon arranged with CBS to get an unprecedented streaming window four days after broadcast of each episode of summer drama “Under the Dome.” Neither side has said how the series has performed on Amazon, but the proof will come in the near future in the form of the number of similarly structured pacts.
The other large signing that showed Amazon’s might was its content deal with Viacom, which included programming from Comedy Central, MTV and Nickelodeon. Kid-centric programming is said to be particularly valuable in SVOD; to make up for the Nickelodeon loss, Netflix has signed deals with Disney (which cost $350 million a year) and DreamWorks Animation. Financials were not released for the DWA deal, but the animation company said it will earn $200 million a year from all of its television deals.
Netflix ended the second quarter of 2013 with 29.8 million streaming subscribers in the United States, and an additional 7.75 million in international markets.
In fiscal 2013, analysts see Amazon earning $1.30 per share, growing to slightly more than 2½-times that to $3.20 in fiscal 2014. These estimates follow a surprising loss of $0.09 in fiscal 2012.
Prime continues to grow its base of subscribers as customers recognize the value of free shipping on products in general, along with its vast collection of streaming content. In March, Morningstar estimated that there were 10 million Prime subscribers, and that the Prime program maxkes up 33% of Amazon’s operating profits. Estimates call for the company to boast 25 million Prime subscribers by 2017, adding between $3 billion and $10 billion to Amazon’s profits.
Amazon doesn’t disclose its Prime numbers, but CFO Thomas J. Szkutak gave the program a vote of confidence in its second quarter earnings call On July 18. “We see very strong growth in Prime subscribers,” he said. “We see very good retention of Prime members.”
In 2012, Prime customers made up only 4% of Amazon’s 182 million active customers.
Amazon revenue is expected to continue to increase at 20% increments annually. Analysts see Amazon growing revenue by 22.4% to $74.80 billion in fiscal 2013, and by 21.7% to $91.01 billion in 2014.
By fiscal 2015, Amazon will likely hit the $100 billion revenue mark. As a comparison, in 2012, only 21 American companies had revenue over $100 billion.
Netflix may be winning the streaming war, but this is a battle that has plenty of room for competitors. And now that the future of Hulu has been settled — at least for awhile — it’s distinctly possible Netflix and Amazon could see a third party become more aggressive on the licensing front, resetting the competitive dynamic in the SVOD space once again.
FOUNDED IN: 1994
CEO: JEFF BEZOS
MARKET CAP: $136.09 BILLION
52-WEEK RANGE: $214.95-$309.39
REVENUES: $15.7 billion
Source : http://variety.com/2013/biz/news/amazon-turning-svod-space-into-a-two-company-race-1200571585/Thank you for visit my website