Amazon is aggressively entering entertainment -- with two big advantages
As Amazon aggressively embraces entertainment, the company has two distinct advantages over competitors like Netflix: Data and diverse offerings.
Everything old is new again. Tie-dye is back. A whole new generation is hooked on Friends and questioning the validity of Ross and Rachel’s break. And online bookseller-turned-Everything Store Amazon is returning to its roots and disrupting media.
Consumers increasingly favor streaming services over traditional TV and Netflix remains the most popular. According to the American Customer Satisfaction Index, Netflix also has a satisfaction score of 81, higher than all of its competitors.
“The whole ecosystem of video production is in a giant state of flux. You see Roma being released in theaters and on Netflix simultaneously,” says Dan Teitz, President of Penthera, a mobile video download solution. “Players like Netflix and Amazon are going directly to content creators and cutting out the production studios. And now Disney and NBC are launching new services, and there will be others. Everyone’s scrambling.”
Netflix is also scrambling, as Amazon has become its biggest competitor. While the ecommerce giant is investing heavily in entertainment, projected to spend at least $5 billion on content this year, it’s everything else that poses such a threat.
“Amazon knows who you really are”
Jeff Bezos achieved his goal of creating an “Everything Store” to such a degree that it’s easy to forget Amazon began as an online bookstore he ran out of his garage. Twenty five years later, it’s books that foreshadow the company’s future in entertainment.
In 2017, Amazon bid for the global television rights to The Lord of the Rings alongside the likes of HBO and Netflix. It won precisely because J.R.R. Tolkien’s estate was confident that promotion for the upcoming series will result in a surge of book sales.
“Amazon’s big play is data. Facebook knows who you want to be, but Amazon knows who you really are,” says Alan Wolk, Co-Founder and Lead Analyst at TVREV, a TV- and advertising-focused analyst group. “People may like Starbucks on Facebook even if they only go three times a year, but Amazon knows they have a standing order for Maxwell House. The advantage for a lot of these franchises is, Amazon can sell a lot of merchandise and a lot of ads.”
That point extends far beyond The Lord of the Rings. Sports content is another big entertainment focus; Prime members can stream Thursday Night Football. Last week, the company also reportedly reached a deal with the New York Yankees and Sinclair Broadcasting to purchase the YES Network.
“Amazon knows who’s tuned into the Giants game,” says Wolk. “When Eli Manning goes for a touchdown, they can put jerseys on sale and see if people buy them if they’re $38 or $40. Do they buy two minutes after the touchdown or five? It’s scary how much they know about everyone.”
“It replicates what we used to experience with cable TV”
Sports programming speaks to another strength: diversity in its offerings.
The company creates and distributes content. With Kindles and Fire TV, the ecommerce giant has a hand in where people watch it. And then there’s Amazon Channels, which allows Prime members to buy monthly subscriptions to premium networks like HBO, Showtime and Starz a la carte.
“In a sense, that replicates what we used to experience with cable TV,” says Teitz. “We’d have 200 channels, but probably only watched five of them. What Amazon brings to the table is a combination of the benefits of having a package and the benefits of having more choice.”
More streaming services are coming, but how many people are going to subscribe to all of them? There will undoubtedly be some churn. It’s less likely hurt Amazon less than some of the others because entertainment is just part of the Prime package.
Amazon is where most product searches start. The company is on track to become the largest apparel retailer in the U.S. Amazon Web Services has a 34% share of the cloud infrastructure market.
Will Amazon become a behemoth in the entertainment space? Maybe. Probably. But given Prime’s ubiquity, the company has set itself up for a win, no matter the game.
