News Analysis
Will Amazon Challenge Netflix?
By Swanni
Washington, D.C.
(January 26,
2012) -- Netflix CEO Reed
Hastings yesterday said he expects Amazon to significantly
expand its video streaming service and offer it at a cheaper
price in a bold move to compete directly with his company.
Amazon refused to comment but talk of the etailer giant
launching a standalone video streaming service is not new. The
company now offers a limited video streaming plan for free to
subscribers to Amazon's Prime shipping plan. But The New York
Post also reported this week that Amazon is considering a
standalone service.
Hastings made his remarks after Netflix released its fourth
quarter financial report which showed the company had recouped
many of the subscriber losses inflicted in the third quarter
after a new pricing structure was implemented. Netflix, which
lost 800,000 subscribers in the third quarter, added 600,000
subs domestically in the fourth quarter, bringing its overall
total to 24.4 million.
Netflix added 220,000 streaming-only users in the fourth
quarter, bringing its steaming sub total to 21.7 million.
However, the increase was boosted by a three-month free trial
offer during the holidays. It remains to be seen if the 'free'
add-ons will stay with the service.
In addition, Netflix's DVD/Blu-ray disc-only subscribers fell to
11.2 million. And the company said it expected to lose another
1.5 million DVD customers in the first quarter. (Netflix
still was able to add subscribers overall because it also added
customers who subscribe to a combination streaming/disc rental
plan.)
"We expect DVD subscribers to decline steadily for every
quarter, forever," Hastings told Wall Street analysts in a
conference call yesterday.
Clearly, Netflix is preparing for a near future where streaming
is the main battleground and its competitors including everyone
from Amazon to Hulu to Vudu to Blockbuster to services that
perhaps have not even launched yet. While the majority of
Americans still prefer hard discs to streaming, the rental
companies are pushing streaming because it is less expensive to
distribute.
Amazon could become Netflix's most potent threat. The etailer,
which has sold goods online for more than a decade, has an
enormous customer data base to target.
