• by Mike Bloxham , Op-Ed Contributor, November 28, 2012

For anyone surveying the modest but expanding landscape of online video providers, such as Netflix, the point at which we start to see meaningful competition between suppliers is approaching.

To date, it’s all been about finding and building an audience and seeing all boats rise together, but the data now suggests that this phase of the sector’s development is coming to an end. The prospect of a more competitive environment looms large.

After all, there is only a certain pace at which the sector can expect to cream off a percentage of cable and satellite viewers (whether through cord-cutting or as additional services). The number of prospective customers is likely to be finite for the foreseeable future also.

Just last week in MediaPost’s "Video Daily News," Daisy Whitney penned an article based on findings from a survey of 1,100 people, which pointed to this fact.  The dominance of Netflix, while still intact, is being eroded by Amazon in total numbers and also in the number of people using both services.

As Whitney notes in her article, the big question for Netflix is whether the growing number of people trying Amazon will opt to switch or choose to maintain both services.

In my mind, Amazon has a clear advantage. Quite apart from an incredibly well-regarded, trusted and transaction-based brand, it has one major and very tangible asset in the competition for online video customers that Netflix cannot hope to match: Free delivery.

For the many who already subscribe to Amazon Prime, the addition of the video service is a no-cost addition to the highly appealing guarantee of no-cost delivery of everything from books and electronics to garden furniture.  For that group, it is difficult to see what Netflix has to offer in a straight comparison.

I have access to both and have been a user of Amazon Prime, due to my pre-existing membership, but in trying out my free month of membership to Netflix, I’m finding it hard to see enough different content to justify the cost.  My family and I frequently spend nothing on Amazon Prime video in a month, but will still watch our fill. The free content is fine for us, barring the occasional movie.

The result is that the fixed monthly fee for Netflix feels like an additional payment for not much additional benefit (if any). This is compounded by the fact that the access to videos doesn’t feel like there’s any cost involved, as I pay for a year’s unlimited “free” delivery.  To my mind -– and no doubt many others -– the video component is a nice added extra.

My consumption patterns may well change over time, but my bet is that if Amazon continues to successfully market Prime as a means of obtaining fixed cost delivery for anything bought on the site, as well as the streaming video service, then Netflix will continue to see erosion of its dominance until it resembles the position of the major broadcast networks.

 

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