Amazon, which has a long history of pricing lower than competitors in many markets, is going toe to toe with Netflix. Their plan to have a worldwide standalone video service, priced at a cheaper rate, could be a problem for Netflix.
Amazon’s new push to expand Prime Video into more than 200 countries and territories includes a bonus feature: a price that undercuts Netflix’s in many markets.
By going global, Amazon is following Netflix’s lead. The streaming-TV provider expanded its service to more than 190 countries earlier this year. In the third quarter, Netflix’s international revenue rose 65% from a year earlier as it added local languages and shows. Now Amazon — which has a long history of pricing lower than competitors in markets ranging from electronics to books — is pursuing the same strategy, and going into markets where some analysts have said Netflix is too expensive.
Amazon’s international foray will test whether its video service has standalone appeal, particularly as the company adds new shows and movies. Amazon recently released “The Grand Tour,” a reality show featuring the former hosts of “Top Gear,” a popular show around the world. As Amazon’s library expands, its low price could start to pose a threat to Netflix’s international growth.
In some countries, such as the U.S., Canada and Belgium, Amazon includes Prime Video as part of a subscription to the free-shipping Prime service, which costs $10.99 a month or $99 a year. The service is also available on a standalone basis for $8.99 a month in the U.S.
In places where it doesn’t sell physical products online, Amazon is charging $2.99 a month for the first six months for video, and $5.99 a month afterward. Netflix’s pricing varies by country, but in many places its prices are close to the U.S., where its cheapest tier costs $7.99 a month.
While the introductory offer for Prime Video is a “celebratory hello world price,” the $5.99 regular rate is “sustainable,” Roy Price, head of Amazon Studios, said in an interview.
In many countries, Netflix has already been competing with local streaming providers, such as Grupo Televisa SAB’s Blim in Mexico and BCE’s CraveTV in Canada. Time Warner’s HBO has also been pushing its online-only service into more territories.
“It’s a competitive world,” said Jim Nail, an analyst at Forrester Research. “Netflix was simply the first mover. Netflix has proven the market, and I expect to see more entrants to come on very quickly.”
Heavy spending
Of course, many consumers may use both Netflix and Amazon. And Netflix has been spending heavily on its own stable of shows and movies to keep viewers locked in.
“For Netflix, they are significantly ramping up their exclusive content, their original programming,” said John Blackledge, an analyst at Cowen & Co. “They are the most innovative in our view. No doubt, it’s competition, but it should be fine.”
In markets such as the U.S., Amazon Prime Video hasn’t been able to eat into Netflix’s subscriber base much, said Justin Patterson, an analyst at Raymond James. That should hold true in other markets, he said.
“Incrementally, it’s some more competition within the marketplace. You’ll see some who’ll chose to use Prime instead of Netflix,” Mr. Patterson said. “It’s a small minority of customers. Netflix is a very good value for what it’s priced.”
Netflix didn’t immediately return a request for comment.
Consumers will pick the service that offers the most local and original content, Mr. Nail said. Amazon already has its own shows and development teams in Japan and India, and is commissioning shows in Germany and Korea, said Mr. Price, the company’s studio chief.
“In every country, there’s a different competitive environment,” Mr. Price said. “The key is the user experience and selection.”
Source: AdAge December 15, 2016
