| | | <<What makes you think Amazon will..?>>
I think that Amazon is losing an incredible, unsustainable amount of money on the service. Further, I think that the losses will continue/worsen and that the recent increase in Prime pricing had more to do with increased content costs than increased shipping costs.
IMO Amazon is now spending over $1 billion per year on content. Deals (especially exclusive ones) with HBO, Viacom, CBS, etc. are extremely expensive. For context, Netflix spends over $2 billion per year on content.
Despite its massive content spend, Amazon's SVOD service has gained little traction. All of the data shows this (see Sandvine stats that I've posted previously, or even Amazon's own recent press release).
In effect, Amazon is spending 50% as much as Netflix on content while getting only 5% as much usage. It's an extremely negative ROI.
What's amazing to me is that Amazon still hasn't figured out the problem. The problem is not content, it's branding. Amazon's content is actually very good. The problem is that people view Prime as a shipping service rather than a streaming service.
It's the same reason why relatively few people bought Microsoft's Zune player. I'm sure it was a decent MP3 player. But when people think music players, they think iPod. And when people think streaming, they think Netflix.
Amazon's Fire TV? An Amazon smartphone? Seem like a bunch of Zunes to me. |
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