Amazon Instant Video Feature Should Hurt Netflix

Filed in Gather Business News Channel by on February 23, 2011 0 Comments

Amazon just recently announced that their all new Amazon Instant Video with more than 5,000 commercial-free streaming videos will be free to Amazon prime members. Amazon Instant Video gives its users instant access to new releases of DVDs and TV shows the day after they are aired, all streaming on compatible devices and computers. They also boast the continuation of their service. Amazon has 90,000 movies and TV shows à la carte to buy or rent, in addition to the free streaming service.

The cost to become a prime member is $79 a year, which is giving Netflix a run for the money. The competition is fierce for this business, and there already have been major battles with digital licensing from the studio companies.

Cost

Amazon is going into direct competition with Netflix, the online one-stop video rental suite. Both are offering online streaming content in a rapidly more accessible world of digital media. Although Netflix has first mover advantage, according to analyst notes presented by Wall Street Journal blogs, competition has been eroding the price for movie rentals.

Currently, Netflix users pay an annual subscription fee totaling $96. This price has taken a downhill path for some time because of the competitive nature of the market. For instance, Redbox had announced their video rental outlets in major shopping centers, and Blockbuster has been doing the same thing with physical video rental kiosks.

With the introduction of market entrants and the structure of the industry, Netflix has been slashing prices to retain customers. Now, Amazon has clear advantage over Netflix, which will later be reconciled perhaps by more price cutting.

Content

Netflix has a clear advantage with licensing agreements. Not just that they have more content totaling 11,000+ streaming videos, to be exact. Content, of course, is not always easy to come by, not without heavy investments and the ability to fight major legal battles. In general, online streaming is not beneficial to studio companies.

Amazon only has 5,000 streaming videos, which is a modest amount but does not compare to NetflixÂ’s library just yet. Overall, the online giant should not take over this segment of an ever growing market but will most likely keep Netflix in check and slow down their future growth prospects.

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Freelance writer in the L.A. area with experience in business and finance writing.I enjoy the fine arts and hold a B.A. in Finance from Cal State Fullerton. I'm currently writing an original screenplay about an emerging painter who finds his muse

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