Since just before the official announcement of the Kindle Fire, and clearly in preparation for the anticipated release, Amazon has been making efforts to beef up their Amazon Instant Video selection. Many of these new acquisitions have even been made part of the Prime Instant Videos library, which allows customers subscribing annually to the Amazon Prime service to stream available content to any compatible device whenever they want with no additional purchase necessary. More than anything, this is the reason that new Kindle Fire owners find themselves enjoying a month of free Amazon Prime membership. It works well to get potential subscribers hooked. More and more, however, people have been viewing the ever-expanding collection of titles as a direct assault on Netflix.
As the most popular video streaming service on the internet today, Netflix caters to over 24 million subscribers and accounted for about a third of all internet bandwidth being used as of last fall. They have had some issues recently after mishandling the publicizing of rate hikes necessitated by expiring streaming rights deals as well as a poorly thought out attempt to split the company into two separate entities specializing in only one aspect of the physical media and digital video combination that customers have come to expect, but subscriptions have since rebounded and there is little sign that they are in immediate danger.
When Netflix CEO Reed Hastings mentioned in a letter to shareholders that he is expecting Amazon to start breaking the Instant Video service away from Amazon Prime in favor of a monthly model more analogous to what Netflix is known for, it was finally enough to elicit comment from Amazon. Brad Beale, the Head of Video Acquisition for Amazon, made clear in a recent interview that it is not the intent of the company to change the way they’re handling things in the near future. He seems to have avoided implying that this was something that would never happen, but at least for the moment Netflix is safe.
The logic behind the decision is sound. Amazon Prime is already less expensive than even the cheapest Netflix subscription. The video content you get with it is not nearly as extensive at this point as what Netflix offers, but nobody claims that it is. By subscribing to Amazon’s service though, even if your goal is just to take advantage of the Kindle Fire’s integration with Amazon services, customers also get free 2-day shipping on anything Amazon sells. The video streaming might not be the biggest money maker in the world, but the associated shipping benefit has a tendency to make impulse purchasing far more appealing. This translates into more regular profits as well as customer loyalty.
Compared to that, it is hard to imagine a huge desire on Amazon’s part to start attacking Netflix on their own terms. For the moment, at least, video distribution appears to remain a relatively small part of the company. The Kindle Fire is obviously meant to change that and it does a good job of showing off the content, but the day when physical goods are less important to the company than digital sales has yet to arrive.