Here’s How Amazon Is Looking To Attract Prime Members In India

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After it was reported that Amazon  (NASDAQ:AMZN) will launch Amazon Prime in India this year, reports now suggest that the company is investing is investing $300 million in creating original video content for Prime Video. This investment would be part of the $3 billion fresh funding for India announced by Amazon earlier this year. The company is reportedly in talks with Indian production houses for building its local video streaming content and is also hiring industry veterans as part of its Prime Video team. Earlier this year, Netflix launched its service in India as part of its global expansion.  However, its growth in the region has been slow due to broadband connectivity issues in the region. Video-on-demand (VOD) is at a nascent stage in India and is expected to witness significant growth in the next five years, with subscribers expected to grow to 105 million by 2020 from the 15 million figure forecast for 2015.  Noting this, we believe Amazon is focusing on making its Prime memberships attractive in the region.  The membership fee for Amazon Prime in the region is expected to be $60 a year, lower than the U.S. subscription rate.  This rate is also lower than the basic Netflix membership, which costs around $90 annually in India. We believe that,  as Amazon looks to establish itself as a dominant e-commerce player in India, Prime Video can act as a catalyst to drive Prime Memberships in the region.

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Prime Video And a Value Based Membership Can Attract Users

Amazon’s Prime Members are the key drivers of its revenues, as they usually spend more on its platform compared to non-subscribers and are generally loyal customers. Benefits such as the two-day free shipping, free video and music streaming and its heads up for instant deals service have attracted and retained millions of customers to its e-commerce platform. The company is now looking to replicate the same model in India, which it considers to be a region of huge opportunity. Although membership-based models have not worked well in the region before, Amazon’s ability to provide the full suite of Prime benefits in India should offer an inducement. These benefits, well priced, shoud appeal to its “value” conscious customers and thus be critical for the success of Amazon Prime in the region. Prime video can play an important role in attracting customers to the membership based model, if it is able to provide exclusive content, in line with or better than Netflix’s offerings. Given the economic and social diversity in India, the subscription model, may well have a slow start. Moreover, the lack of a cheap and high speed broadband infrastructure in the country limits the use of video on demand services in the region,  even as Netflix is targeting consumers in the higher economic strata.

We believe Amazon is focusing heavily on India for its future e-commerce growth. While the economy holds strong potential, competition will be intense, from both local players such as Flipkart, which has the leading market share in the region, and from Chinese  e-commerce giant Alibaba, which is looking to enter this market soon. For Amazon to establish itself as a dominant player in this market, it will have to adapt itself to the region and tweak its Prime memberships to suit the value conscious consumers in the region. Prime Video can play an important role and Amazon’s investment in creating original content for its video on demand service can work to its advantage.

 

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