Wired’s Tim Carmody provided a thoughtful analysis of how Amazon Instant Video could overtake Netflix as well as iTunes in the streaming video area. Carmody makes a strong argument about Amazon’s value proposition as a one stop shop for video with it’s all-you-can-watch Prime video streaming, on-line rentals and purchases as well as its DVD business. Carmody suggests that more content and device availability are two of the keys for Amazon Instant Video to become the market leader. Well, the devil is in the details and in both of these areas as well as others, Netflix currently has a number of advantages over Amazon Instant Video.
Content: If you look at the services apples to apples, Netflix still has a significant lead over Amazon when it comes to the total number of TV shows and movies. When I last looked in December, Netflix had over 49,000 TV episodes and movies while Amazon had just over 11,600. While Amazon publicly states they have 13,000 titles available as part of Prime streaming, it appears they count both the high definition and standard definition versions of TV episodes as two titles. Amazon does have some unique offerings such as next day availability for select PBS shows including Frontline and the News Hour. Regardless, Amazon will have to commit to paying some serious dollars to approach the size of Netflix’s streaming catalog.
Devices: There’s a few reasons why Netflix is on 800+ devices versus Amazon Instant Video’s 300+. Carmody didn’t see a obvious reason stopping Amazon from creating an Amazon Instant Video player for iPads and iPhones but there’s a couple. As Reed Hastings stated on their recent earnings call, Netflix is not interested in the pay-per-view or purchase market. Netflix is only interested in delivering an all-you-can-watch streaming catalog at one low price. For device penetration, this is a real advantage for Netflix. Netflix can peacefully co-exist on many devices with paid services such as Apple’s iTunes and the Sony Entertaintment Network. While Amazon could develop an iOS app, I doubt Apple would approve a direct competitor to iTunes. Furthermore, given that iOS devies don’t natively support Flash video, one can’t even watch Amazon content through the Safari web browser (Amazon could create a second set of iOS-compatibile encodes as YouTube did).
Also, one has to question how Amazon Instant could be on most of Sony’s Blu-ray players, streaming boxes and HDTVs but not on the Playstation3 which has sold tens of millions. Speaking to industry sources, I’ve learned that Amazon usually develops the Instant Video client itself. So, in the case of Sony, they would have to author yet another version of the app for the Playstation3 in addition to the two other versions they’ve created for Sony’s other devices (while Amazon is probably willing it’s probably more likely that Sony doesn’t want competition to its service). Another example is TiVo which was one of the first boxes with Amazon Instant Video when it was only a download service. However, the TiVo version has not seen a major refresh since its initial release and hence, it cannot access the Amazon Prime Streaming Library. Implementations on other devices such as Blu-ray players don’t have access to surround sound. Amazon would be better off providing a software SDK and user interface guidelines to device manufacturers as Netflix does. Regardless, there there is a real ceiling to Amazon’s market share by not being on iOS devices.
In addition, Netflix has encouraged a universe of third-party web apps by providing an API and full XML version of its catalog to any third-party developer. While Amazon does have it’s Associates API, it’s limited in what it can do compared to Netflix. The end result is that there is a large number of web applications that incorporate the Netflix data.
Audio and Video Quality: Netflix offers most of its HD content in 1080P whereas Amazon offers 720P. HBO GO, which also offers 720P HD video, provides its video at a higher bit-rate resulting in a smoother, better-looking picture. Also Netflix, VUDU and HBO GO have all adopted the more bandwidth efficient and better sounding Dolby Digital Plus for surround sound (Amazon uses Dolby Digital which still sounds good). In the world of mobile devices, these audio and video differences don’t matter much (unless you’re hooking the tablet or mobile phone to a TV). However, as consumers purchase HDTVs with bigger screens, the difference is apparent. Unless Amazon is saving significant dollars in licensing costs, there’s no reason not to make the move to higher quality encodes, 1080P and Dolby Digital Plus. (Downloads to the TiVo Premiere are in 1080P and Dolby Digital)
Content Discovery: Not only is it important to have great content but there needs to be an easy way to find it. Netflix’s Instant Queue is one of the service’s most convenient and popular features. Anytime Netflix has messed with it , they’ve been inundated with customer complaints (remember when expired titles disappeared?). While Amazon has a “video library” to track purchased titles, there’s no way to bookmark or have a queue of Prime streaming titles. Netflix also distinguishes itself with its recommendations. However, its Achilles heal has always been that the families share one account leading to some humorous and sometimes disturbing recommendations (Since you like Phineaus & Ferb, you may also like Psycho ). This is probably the easiest area for Amazon to catch up in since they are aleady famous for the “Customers who bought this item also bought…” from their website.
Parental Controls: When Amazon introduced its Prime service, it did so without any parental controls (purchases require a pin-code). While Netflix does have parental controls, they are clunky to use at best. Netflix indicated on their Q4 conference call that they would be rolling out user profiles for family members sometime this year.
Closed captions: Subtitled movies in Amazon’s Prime streaming catalog are far and few between. As the market leader, Netflix has been criticized for not captioning all of its content. The National Association for the Deaf sued Netflix last year for violating the Americans with Disabilities Act. Netflix has made progress, notability in the area of TV content but still fell short of its goal of captioning 80% of its content last year. If Amazon is to become the market leader, they would be subject to the same scrutiny. Amazon at the moment only has subtitles available on a small number of movies. Since they are subtitled (as opposed to captioned), they cannot be turned off. The Amazon Instant Video player does not appear to have the ability to show closed captions.
In closing, Amazon Instant Video has a lot of potential with its myriad of options to satisfy a customer’s video desires. On the other hand, Netflix is focused on becoming a pure Internet based streaming service. While that focus has given Netflix the lead in many areas, can they survive a focused charge from Amazon with its deep pockets?