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Amazon Unbundles Streaming

Apr 25, 2016
Vincent Moy, Director, Industry Analyst ;
Entertainment

I love free stuff — free samples, free trials, and who doesn’t like a free lunch? By reaching out to folks like me, Amazon Prime has engaged droves of online shoppers via free two-day shipping, with a paid annual membership fee; five years ago, the deal got even sweeter with free streaming video content. Prime’s initial assortment of TV shows and classic movies has grown over time to include new release theatrical blockbusters and a roster of critically-acclaimed, award-winning original shows like Transparent and Mozart in the Jungle. With marquee titles like these, now Amazon can attract viewers with its library alone, and by launching a stand-alone streaming service, it’s staking a claim and announcing its status as a bona fide video destination.

Amazon’s new streaming offer — independent of Prime — brings focus to a high profile arena, and squares off toe-to-toe against category leader Netflix. But lest we forget, Amazon isn’t a new video contender either; the e-commerce giant has had its hand in home entertainment for years. Leveraging its online retail heritage, Amazon is second only to Walmart in disc sales. Amazon’s video street cred is also evident in its share of downloads and online rentals, both of which grew last year to rival iTunes’ popularity. When you factor in Prime Video’s stature as the first SVOD platform to offer 4K content, Amazon’s streaming video was destined to be its own line of business.


The $8.99/month price point for all-you-can-eat video feels like a good deal. It’s not only cheaper than Netflix’s most popular $9.99 subscription, it’s a lower cost of entry than Prime and more flexible than a $99 annual commitment. Although the cost of the stand-alone service adds up to $9 more annually (e.g., $108), the single-digit price point is easier for financially constrained households to swallow than a one-time hit of a hundred dollars. In addition, being unbundled from Amazon’s endless marketplace could be a good thing for consumers who are trying to avoid the temptation of impulse shopping.

By appealing to a new market segment, Amazon’s savvy move will expand its SVOD market share, and increase its video transaction business as well. It’s an easy transition from streaming to renting or buying titles when Amazon’s recommendations feature presents them side-by-side. Did you just watch Hunger Games: Mockingjay Part 1? Click here to buy or rent Mockingjay Part 2. Are you a fan of Tom Cruise movies? The Amazon library of titles has them all, in both free streaming or paid options – what you pay is up to you. By bringing more viewers into their ecosystem, Amazon greases the wheels for all of its video business to succeed.

In a world where viewers can get entertainment from virtually anywhere, Amazon has a lot of reasons to keep me coming back, for watching video and a whole lot more. Even if it’s no longer “free.”