After launching Prime Video at a much cheaper rate compared to Netflix in India, Amazon (NASDAQ:AMZN) is now moving fast with partnerships to expand its user base in the country. The company recently partnered with telecom provider Vodafone giving its customers access to Amazon Prime video at promotional rates. Vodafone India is merging with Idea cellular, creating India’s largest mobile phone company with a total subscriber base of 400 million customers. This is a significant number of the total mobile phone subscribers in the country, which exceeds 1 billion. Amazon’s strategy with Prime Video in India differs from Netflix, as the company is focusing on local content and smartphone video consumers as its target audience. By partnering with India’s largest telecom operator, Amazon can penetrate into this user base and also build a competitive edge against local players such as Reliance Jio, which are offering similar streaming services on mobile phones.
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Tapping Into The Rapid Smartphone Growth
India is a “mobile-first” economy, and much of its population primarily uses the internet on their smartphones. It is estimated that the country will have nearly 500 million smartphones by 2020, up from the current estimate of 200-250 million smartphones. As telecom operators roll out 4G services and reduce data tariffs in a competitive environment, consumption of video content on smartphones is likely to increase significantly. India’s young population (50% of the country’s population is under 25) favors watching content on the go, leading to an increase in video consumption on mobile devices. Further, 90% of households in the country have a single television set, making mobile devices the default personal entertainment tools for individual consumption. The country is expected to have 650 million internet users by 2020, making it a huge market for video on demand consumption. Amazon is looking to tap into this growth to penetrate deeper into the Indian market. By partnering with telecom service providers, the company is enticing users to watch its content on their smartphones with a 4G connection. This strategy is likely to work in India, since a majority of the population is not likely to invest into a fast broadband connection at home to view content on large screens. Further, Amazon is using this partnership to promote its related services. Users signing up for Amazon Prime via Vodafone will get cash back in their Amazon Pay account. This will ensure that the company drives registrations for this service, leading to higher e-commerce volumes in the future.
With a huge growth opportunity in India, Amazon is looking to grow revenues on thin margins and become ubiquitous in the region. It is already a key player in the e-commerce segment, and by driving prime memberships through streaming video the company is looking to grow its market share further in the country. However, in addition to Netflix, several local players could prove to be a threat for Amazon. For instance, another large telecom operator in India, Reliance Jio, is offering movies and TV series for its subscribers at a nominal membership fee. This company has a model similar to Amazon Prime, where Jio members (akin to Prime members) get several perks such as free movies and TV series upon subscribing for a phone connection. Because of this competition, partnering with a competing telecom company (which will now become the largest in India) is a smart strategic move by Amazon and should cement its position in India.
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