Amazon.com, Inc. (NASDAQ:AMZN) recently announced plans to bring Amazon Prime Video to 200 countries. Currently, Amazon Prime Video operates in the United States, the U.K., Germany, Austria and Japan. Undoubtedly, Amazon stock will see some benefit to this expansion.
But this may also affect Netflix, Inc. (NASDAQ:NFLX), which is looking to grow its international subscribers. On Oct. 30, Netflix founder and CEO Reed Hastings told the Wall Street Journal that he wants NFLX’s subscriber base to be 20% U.S. and 80% global. Currently, NFLX has 47 million U.S. subscribers and 39 million foreign subscribers.
How will Amazon Prime Video’s rollout affect NFLX? Does it threaten Netflix’s expansion plans? Is this a reason to buy Netflix or Amazon stock?
Does Amazon Prime Video Beat NFLX on Content?
Netflix produces global hits like House of Cards, Orange is the New Black, and Narcos. Amazon Prime Video features Amazon Originals such as The Man in the High Castle, Transparent and Mozart in the Jungle. Additionally, both NFLX and AMZN license content from other creators.
It remains unclear which streaming service leads in content. Mark Fahey of CNBC compared the two and found that while Amazon features more videos, both services ended up with 36,000 hours of video. NFLX, however, has more content rated three stars or more. And Netflix subscribers may be more difficult to please than Amazon viewers.
On movie review site RottenTomatoes, Netflix beat Amazon Prime Video, with 357 certified fresh movies to AMZN’s 236.
Both Amazon and NFLX are wary about revealing which shows are available where, for fear of inviting unfavorable comparisons. However, Finder.com tracks NFLX’s library across the globe.
In general, Amazon tailors its content more to local tastes, while Netflix looks for shows that will be hits across the world. This might not work everywhere. It appears to have bruised NFLX in France, where Netflix is currently losing money. French viewers seem to prefer local content more, and AMZN’s close ties to French filmmakers may help it win in France.
Amazon Prime Video’s content library in different territories is not yet known. AMZN must secure international rights for a series it licenses from other studios to show them overseas. This could cost AMZN money, but it won’t cost Amazon to air Amazon Originals around the world. NFLX faces the same problem with licensing; it lacks the global rights to House of Cards and can’t stream it globally.
AMZN vs. Netflix
The experience of NFLX and Amazon in Germany and the U.K., markets where both are active players, may help us see the drivers of success in global markets. NFLX dominates streaming in the United Kingdom, while Amazon Prime Video comes ahead of NFLX in Germany.
The research firm Barb put the number of Netflix subscribers in the U.K. at 5 million as of March 2016. This dwarfed Amazon Prime Video’s 1.6 million subscribers. In Germany, the reverse holds true. According to a report by Gold Media, Amazon Prime Video commands 32% market share in Germany for paid video-on-demand, while NFLX holds only 17%.
Netflix was first to launch in the U.K., in 2012. Amazon Prime Video came later to the UK, in 2014. Both NFLX and AMZN came to Germany in 2014. Amazon Prime Video appeared in Germany in February 2014, with Netflix coming seven months later, in September 2014.
In the U.K., Netflix starts at £7.49 a month, or £89.88 a year. Britons can either subscribe to Amazon Prime Video for £5.99 a month, or Amazon Prime for £79 a year. NFLX doesn’t cost much more than Prime, which may partly explain NFLX’s greater success there.
In Germany, a Netflix subscription costs almost twice as much as Prime membership. Amazon Prime costs €49 a year, although this will rise to €69 in February 2017. In Germany, NFLX starts at €7.99 a year, as of August 2015. Price appears to make something of a difference. In markets where Amazon Prime membership is cheaper, we may expect AMZN to prevail. In countries where the two are comparably priced, NFLX should win.
Are Amazon Prime Video and Netflix Even Competing?
If the global market resembles that of the U.S., NFLX may have little reason to worry. Netflix wasn’t affected earlier this year when AMZN rolled out video-only Prime subscriptions at a lower price than NFLX in the U.S.
Amazon Prime offers free two-day shipping, music streaming, photo storage and other perks in addition to streaming. A whopping 91% of Prime members signed up mainly for the free shipping, according to a survey by CutCableToday.