Tuesday, 5 January 2016

Amazon Prime vs NetFlix

Amazon, the giant of online retailing, has over 35% market share of cloud platforms. With a market cap of over $300bn it dwarfs a company such as News Corp at $10bn.

Amazon's share price was about $5 in 1998 and now stands at over $600.

The perception of dominance therefore of media companies in local markets must be taken with a pinch of salt given the expansion of the Amazon Prime entertainment offering. Stories of success and failure in the entertainment industry have often been driven by the ability of distributors to pay very high prices for exclusive content for long enough to destroy the competition and grow a customer base. This is even more extreme if Amazon decide to use its content offering as a marketing tool for the retail offering.

What price to understand the level of ambition for Amazon Prime and the investment that they are prepared to make in it. Free hosting / distribution and customer care are a pretty good start combined with hassle free online payment.

NetFlix, success story that they are, have clearly recognised the threat and started to produce content in house (such as the excellent Beasts of No Nation).

These developments look to be good news for both the producers of compelling content and the massive remaining global content distribution platforms once they have fought it out and either consolidated or been forced out.

Amazon look to be able to lose money on content for longer than NetFlix if Amazon have decided that this is a priority area.

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