06-03-2012, 03:02 PM
Grieve Wrote:The studios have raised their prices, and they can't affort to pay for the content anymore. Amazon has much deeper pockets, and will probably win in the long run.That still doesn't make any sense though.
It doesn't matter how deep Amazon's pocket's are. It's cost vs revenue, not money-in-bank vs revenue, unless you are trying to sink a competitor and don't mind losing a lot of money to do it.
If Netflix can't afford to stream good things for $7.99/month, Amazon certainly can't afford to do it for $79/year, especially when most of that is probably covering their 2-day shipping costs for Prime. If studios want to charge a ton of money, then you won't see it on Netflix but you also won't see it on Amazon Prime. You might see it on regular Amazon and iTunes, but it'll be a $4 pay-per-view rental.
Or to put it another way, yes, Netflix's "single price package deal" does have a limited selection, but it's an order of magnitude better than Amazon Prime's selection and infinitely better than iTunes, since iTunes has no such deal. If Amazon wants to get serious about competing with Netflix, they'll need to charge more, and possibly break it off of Prime.
I actually think streaming is ahead of its time right now. I doubt it's a coincidence that Netflix's main Euro competitor, LoveFilm, follows the same model as Netflix: streaming + discs. While I think it's smart to stay ahead of the game, streaming today is "ahead of the game". Interesting article:
http://techcrunch.com/2012/01/25/netflix...d-margins/
Netflix makes more revenue from streaming, but more actual profit from DVD rentals. The future is streaming but the present is still DVD rentals.
The iTunes model, as Vanraw's article seems to imply, is "stuck in the doldrums" with "virtually no growth".
Particularly in a down economy, I think Netflix will trounce iTunes, UNLESS, and this is a possibility, Apple decides to eat some red ink for a while and obtain a lot of exclusive deals purely to kill Netflix. Not sure Apple's stockholders would overly approve of that, though. Streaming just isn't Apple's money maker.
For me, in thinking about Netflix as an investment, the main threat I see is LoveFilm. I don't have a feel for how that competition is going to turn out. I'd be especially curious to see if LoveFilm had plans on coming to America. Maybe they're waiting to see how they fare in Europe before trying to beat Netflix on their home turf.