How Much are Amazon’s Streaming Efforts a Threat for Netflix?
Source: GigaOm, sfgate.com, Trefis estimates
Amazon (NASDAQ:AMZN) recently added about 2,000 titles from CBS (NYSE:CBS) and 1,000 titles from NBCUniversal, which is now part of Comcast (NASDAQ:CMCSA). [1] This implies a boost of 50% to its streaming content helping to propel its library to a total of 9,000 titles. Naturally this begs the question of how serious this move is for Netflix (NASDAQ:NFLX), which has pioneered online video streaming rental service in the U.S. Below we demonstrate that Amazon, though potent, is still far away from challenging Netflix’s subscriber growth.
Our price estimate for Netflix stands at $221, which is about 5% below the market price.
Content Still Very Different
- Up 27% Year To Date, Will Q1 Results Drive Netflix Stock Higher?
- Netflix On A Roll As It Benefits From Paid Sharing And Ads. Is The Stock Undervalued At $610?
- Up 50% Over Last Year, Will Q4 Earnings Drive Netflix Stock Higher?
- Will Netflix Stock Rally 40% To Return To Pre-Inflation Shock Highs?
- How Will The Password Sharing Crackdown Help Netflix Q3 Results?
- Will Netflix Stock Return To Pre-Inflation Shock Highs Of Over $650?
While Amazon Prime has about 9,000 titles, Netflix has well over 20,000 titles. [1] [2] Moreover, it is not just the quantity that matters, the quality is very important as well. Netflix has been pushing for high quality content including exclusive rights for series such as House of Cards. Moreover, Netflix’s video quality seems to be better when compared to Amazon prime. [3]
Evaluating Amazon Prime’s Benefits
Amazon Prime membership amounts to monthly fee of $6.60 per month, cheaper than that for Netflix’s streaming offering. It allows members to get discounts on shipping of merchandise bought from Amazon. Then why is still Amazon not yet a serious threat?
The answer lies in a closer look at these benefits. Amazon Prime service would be attractive to someone who buys frequently from Amazon. A serious movie buff or TV series lover will still prefer Netflix because of its offerings. When you can get a lot more titles, better video quality, streaming ability to multiple devices including Wii, Xbox and Play Station for just an extra $1.33 per month, then why not go for it? Or why not have both?
In essence – Amazon will need a lot better content before it can start challenging Netflix. There is no denying that Amazon is capable of gaining this, and with the acquisition of PushButton, it will look to expand its device reach as well. Netflix will always be ahead unless Amazon acquires content at a faster rate.
See our complete analysis for Netflix’s stock.
Notes:- Amazon getting serious about competing with Netflix, GigOm, Jul 28 2011 [↩] [↩]
- Amazon, CBS deal a challenge to Netflix, Hulu, sfgate.com, Jul 21 2011 [↩]
- Netflix vs. Vudu vs. Amazon and More: A Consumer Guide to Streaming Video, foxnews.com, Jul 18 2011 [↩]