Amazon.com has failed to match Netflix’s market share in the streaming video area to date. [See: http://www.associatedcontent.com/article/6193116/will_amazoncom_lose_the_video_battle.html?cat=15]. But Amazon is capable of turning the game around and achieving dominance in the streaming video business. Here’s how:
As I noted in a prior article, Amazon has tried to get its existing customers to try its streaming video service by offering $5 of free video to customers who buy certain dvd products. Clearly, the intent here is to get people to simply try streaming video, see the benefits of it, and then become repeat customers of that service. This approach will work on a certain percentage of customers, but it will probably be a very small percentage.
Offering small financial incentives to existing customers is not the solution to Amazon’s problem, but it does incorporate an important principle: By offering incentives to existing customers, Amazon is trying to leverage an asset it has that Netflix does not have (i.e., a huge body of non-streaming-video customers). Amazon needs to use its unique assets, but in different ways.
The most obvious solution is for Amazon to combine its subscription video service with another service, like Amazon Prime. The selling point to customers will be something like this: For $X, you can get streaming video from Netflix. But for that same $X, you can get streaming video from Amazon.com plus free shipping on all of your Amazon orders.
Using this approach, Amazon can offer customers a value proposition that Netflix simply cannot match. To win this battle, Amazon needs to make a standalone pay-for-streaming-video service seem hopelessly inadequate. They need customers to say, “Why would I pay $X for streaming video from Netflix when I can get the same thing plus [some other benefit] from Amazon?”
Unfortunately, it is difficult for a business to have the will to implement a strategy like this. Witness, for example, the way Blockbuster Video has completely lost the video battle to Netflix and Redbox. Early in the game, Blockbuster could have captured the majority of market share by offering in-store incentives in addition to mail/kiosk delivery of dvd’s. But it waited too long and lost the battle.
Will Amazon.com implement this proposed strategy? I am afraid it probably will not. At this point, it is being too timid in its attempts to compete with Netflix. Consequently, it seems unlikely that it will take the steps necessary to win in streaming video.