Charles Edison

"Economics, politics, and personalities are often inseparable." - Charles Edison

Wednesday, February 2, 2011

Amazon Encroaches On Netflix

As discussed in this article, Amazon is going to start streaming movies and TV shows online to its customers. This is great for Amazon since more and more people want to watch television online now, but it's not so good news for Netflix. Netflix has done a great job building itself up with online streaming of movies, home delivery, and no late fees. Most importantly, it beat out its biggest competitor: Blockbuster. Netfilix had a very strong hold on online streaming, but Amazon coming in could change all of that. It would be really convenient for consumers to get their books and movies all in one place. That would give consumers a good substitution for Netflix, especially if Amazon is cheaper. Substitutions equal a decrease in quantity demanded for Netflix, which equals a decrease in profit. Since Netflix has a larger selection and an HD option, I don't think Netflix will be in major trouble. But as Amazon develops their new idea, Netfilx will have to find something to stay in the game.

9 comments:

kern said...

Why is Amazon wanting to get into this market? What about Hulu? Do you think more competition in the streaming market will lead to a difference in prices?

I really think that we are on the precipice of a new way of watching TV. With the advent of DVR, Amazon, Netflix and Hulu the traditional model of financing television shows through advertising has to evolve. Cable companies are also going to have to take a hard look at how they are positioning themselves as well since you can receive so much content on your TV through streaming enabled Blu-Ray players, Apple TV and other hardware. All of these changes will lead to a revamp of the TV market similar to what has happened to the music market and what is currently happening in the book market.

Smith said...

Will Amazon try to stream through the gaming systems (PS3 etc...)? In my opinion, that solidified Netflix current market position because it cut down on the "time" element consumers must put into their purchase.

Easton said...

This is an interesting development that will definitely determine what will happen with online streaming of movies in the future. Like Alison already said Netflix has done a great job of establishing themselves in our homes through adding support for more and more devices. Competitors such as Hulu which Kern mentioned are moving to compete with Netflix by doing the same thing. With so many services offering online streaming of movies and television shows will the bidding wars for the right to show certain things drive the prices of the services up? Also can their be more than one successful streaming online service?

Alison said...

Kern:

Amazon may want to get into this market for the simple reason that it would make them more money. They already have a really solid consumer base, and those consumers might find it really convenient to buy their books and movies all in one place. Also, Amazon has the Kindle. In the future, they might enable the Kindle to play movies too, which would increase the desire for one and perhaps help the Kindle win out over the Nook.
As for Hulu, it streams mostly less recent, non-mainstream movies. It's definitely not as desirable in the movie category. Plus for a lot of shows you can only watch the most recent five or so episodes. So for people wanting to go back further than that, a place where you can rent/stream season disks of shows might be more desirable.

Connor said...

I dont believe Netflix has anything to worry about. Because of the cheap rate and the ability to watch virtually anything, for anyone to compete and to be able to gain as much exposure as Netflix has would take quite a bit of time.

Alison said...

Smith:

Yes, you can stream Amazon video to the PS3, Xbox, and Wii. What was interesting is that in Amazon's instructional video about it, they included Netflix and Hulu. Not sure what that was about... But anyway, apparently if you wanted to stream Amazon, you can do it in the same places at you can stream Netflix.

Matthew said...

I see this as removing a monopoly from the market. With Amazon now streaming movies and shows over the internet much like Netflix there will now be a competitive fight for the customer base. Yes there is Hulu and was Hulu but that is mostly known for TV shows and those weird alien commercials from the Superbowl the year it was introduced. However Netflix will still have something Amazon doesn't, sure streaming is the way of the land and future but what about hard copy rentals? Sure you have your local movie rental place but who can say they will have that dvd for the long car ride or getaway? Netflix will not loose massive sales, they still have hard copies and they still have the edge on consumers and HD videos.

Cara Sheffer said...

Netflix works great and has nothing to worry about. All Amazon is doing is bringing a little competition to the table. As of right now, it should not be much worry to Netflix. Netflix brought movies to people quickly and for little money, yet it is successful. A lot of their stuff can be done without a DVD mailed to your house now which is also catching on. Amazon as of now should be no threat to Netflix.

Brandeezy said...

Netflix has made a name for themselves and are probably in no trouble. For example, if Taco Bell decided to sell Hamburgers would Mcdonalds be in trouble? If Amazon ever does become a threat to Netflix it will be a long time from now becouse amazon must first make a name for themselves for online streaming.