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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.

What do you think? Offer your comments below!

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