The Netflix-Amazon Battle: Maybe Netflix isn't so Bruised After All

by Daisy Whitney, Dec 29, 2011, 9:52 AM

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So, yeah. Netflix messed up so badly this year that its CEO garnered a sketch on Saturday Night Live. And, sure, stock prices have plummeted. And okay, now the company has taken a beating in the annual retailer survey conducted by Foresee. But could its woes be ending?

Let’s dig into two recent studies to understand how the Internet giant is poised for 2012.

First, customer experience analytics firm Foresee reported this week that after Amazon and Netflix had been neck and neck for tops in customer satisfaction in online retail for the last seven years, Amazon pulled ahead. Netflix dropped 8% to a 79 on the study’s 100-point scale, while Amazon climbed two points to 88, ranking as the top performer. It’s no surprise why Netflix fell — rate hikes and then a bungled plan to spin off its DVD rental business did not sit well with customers or Wall Street. And judging by the sheer number of Amazon boxes I saw sitting by the recycling curbside this week after the holiday shopping season, Amazon is faring just fine.

“The two companies, who have long been together atop the Index, are starting to diverge, signaling a strong year to come for Amazon and a difficult one for Netflix,” Foresee said in its report. “Amazon and Netflix have been separated by only one point or less for the past three years; suddenly with Netflix’s drop and Amazon’s increase, the span jumps to nine points, the largest gap between the two industry titans in the seven-year history of the research... Amazon  has been taking the long-view and customers have been responding. Low prices, a robust inventory of  merchandise, free shipping, and added capabilities for digital downloads and streaming video are drawing in customers and increasing revenues.”

But has Netflix stopped the bleeding? A recent Citigroup study found that 57% of Netflix users are extremely or very satisfied with the service. To be fair, the number of consumers who are extremely satisfied is down from the last study in May, but yet Netflix envelopes are still in many mailboxes and Netflix is still the default for video streaming for most devices from consoles to tablets. Even on my family’s new Kindle Fire, the Netflix service is still a bit easier to use than Amazon’s own instant video service.

Perhaps the bulk of Netflix users who planned to defect have done so already.

Could 2012 be a better year for the Internet giant? Citigroup predicted net additions of 9.9 million streaming users in 2012. Plus, when asked which websites they use to watch movies or TV shows online, 27%  of respondents said Netflix, compared to 15% for Hulu, according to Citigroup.

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