As the grandfather of streaming video, Netflix has suffered the slings and arrows of being out front, exacerbated by hubris and internal missteps.
The video rental company's announcement of separate fees for DVD and streaming services a year ago was a disaster, one that was exacerbated by CEO Reed Hastings’ foot-in-mouth comment regarding subscriber outrage, "It's something we'll monitor, but Americans are somewhat self-absorbed."
“Despite shrinking margins, a weakening balance sheet and increased competition, the stock was bullet-proof. Netflix was the great Achilles that vanquished Blockbuster Video with a little assistance from Coinstar's Redbox. But like Achilles, Netflix was not invulnerable,” notes Seeking Alpha.
Enter Amazon and its move to free video streaming with Amazon Prime in February 2011, membership priced at $79/year, including free Super Saver Shipping, free book rentals via Kindle and the add-on to rent or buy digital movies and TV shows for an additional fee providing newer content overall than on Netflix.
Netflix has subtitles on about 80 percent of its movies, while Amazon has none, and the former offers a genre menu, personal queue and recommendation algorithms. The bottom line, as the New York Times puts it: "Netflix beats Prime on movie selection, site clarity and playback features. It has much more to watch, too; Netflix won’t say how many movies it has, but informed estimates put its catalog as twice the size of Amazon’s."
Hulu, the joint venture between NBC Universal, ABC Television Group, Fox Entertainment Group and others, is free to consumers through paid ads. Hulu Plus, the paid subscription tier, offers new TV product in early windows, competing more directly with DirecTV, DISH, and Comcast.
Apple’s sale of digital videos through iTunes Store, as with its music business, is more about selling hardware than content. For now it has allowed a Netflix app on its mobile devices — which may be short-lived when Apple TV relaunches.
And new kids on the block Verizon and Coinstar's Redbox service are beta-testing a JV that integrates streaming and DVD delivery, via 36,000 kiosks – plus video game rentals.
“Netflix needs to prepare for war. They need to address their perceived weaknesses and build on their strengths,” writes Seeking Alpha.
By offering video games as part of their DVD/Blu Ray delivery service and new content through Open Connect to fill the space between casual and hardcore gamers, “Netflix could exploit that gap by allowing small and medium sized developers to publish and distribute games through its content delivery network. Adding a few new movies and TV shows a month is good; adding a catalogue of streaming video games could be a game changer.”
A disruptive advantage for Amazon is speed of delivery. “If Amazon Prime succeeds in implementing the same day delivery system, shoppers are likely to become more accustomed to the point and click shopping model.”
The reams of comments on David Pogue’s article in the Times, "Potluck for the Eyeballs: Amazon’s Streaming Service," reinforce that the turf wars now being fought will be settled by the marketplace itself:
I've always found Amazon's movie browsing to be an impossibly bad experience, which is surprising because their other lines of business are so good…Netflix, however, has nearly EVERY movie - if you're ok waiting a day or two for a DVD. It's the combined service (DVD + streaming) that gives Netflix their biggest edge. For instant gratification people who have to have it now now now, there's still plenty to watch on-demand.
To be honest, I'm annoyed with both services. I find the Amazon search function horrible for their Prime free streaming, and Netflix has a really limited amount of titles to watch.
Other than as a pipe to the internet, cable is becoming redundant. Set top box (Roku, Apple TV) with OD service (Netflix, Amazon etc) seems to be the inevitable way to go. Amazon definitely has a better model of upselling new movies, but there is a lot of dust yet to settle on the streaming media landscape.
With so many models bubbling up in the digital world, "it’s complicated" has become the cliché du jour. Perhaps what will emerge is a return to the days of two major choices, a Hertz/Avis, HBO/Showtime landscape, or one where subscribers use both services in tandem for different reasons. Perhaps, Netflix will prevail for streaming video and Amazon for free shipping, free e-book rentals, and occasional new movies not offered on Netflix. Stay tuned.