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Netflix Loses: Who Wins?

Netflix’s recent stumbles may help boost  Amazon and other streaming video competitors, but there’s still no clear choice for consumers weighing the various video-on-demand services, experts say.

Wall Street was expecting Netflix to reveal that it lost some subscribers in the third quarter, thanks to a price hike, followed by that embarrassing Qwikster episode. But the problem was bigger than analysts expected: 810,000 people canceled their Netflix subscriptions in the quarter.

So far, the company’s wounds have been self-inflicted, says Dan Rayburn, a principal analyst with Frost & Sullivan. But the online streaming landscape has gotten a lot more competitive in the past couple of years, and there’s one competitor in particular who’s well-positioned to welcome Netflix refugees, Rayburn says.

Sure, newer services like Hulu Plus or the Dish Network-Blockbuster partnership could eventually become bigger players. And Apple could be a formidable competitor if they broadened their reach beyond Apple-made devices. But Amazon Prime is the real one to watch, Rayburn says. “To me, Amazon is the clear-cut winner,” he says.

Amazon has a number of built-in advantages, Rayburn says: They own the back-end web infrastructure that powers streaming offerings (Netflix itself uses Amazon Web Services), which helps keep their costs down. The existing gigantic online shopping business is helping Amazon sell the Kindle Fire cheaply, which should ultimately help grow their subscriber base. They’ve also got four different ways of distributing content (selling DVDs, selling or renting digital movies, and streaming), which appeals to movie studios and fits comfortably with the traditional release window model for movie distribution.

“Oh, and Amazon is also cheaper than Netflix,” Rayburn says ($79 a year for Amazon Prime compared to $95.88 a year for Netflix’s unlimited streaming plan). “I think they come out a winner but not because of the mistakes by Netflix. They come out a winner because of all these advantages,” he says.

That said, Netflix still offers advantages over its competitors:  More than 20,000 titles are available for streaming compared with 12,000 on Amazon, Rayburn says. Netflix remains confident about its offerings. “The numbers are what they are,” spokesman Steve Swasey, says of the loss of subscribers. But, he adds, “the company is leading in streaming video with an enormously robust catalog. There’s more than 700 devices on which you can watch Netflix instantly. We’ve got amazing content. None of this has changed.”

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    • I would be cautious to list The cuanlh of Netflix in 43 countries in Latin America and the Caribbean as a high. This means increased programming, infrastructure, and administrative costs for a business opportunity in new territories that won’t necessarily be successful. I have many doubts about their possibilities for success in Latin America due to low broadband penetration/speeds, low credit card use in the region, lack of fresh local content, high levels of DVD/internet piracy, an established competitor (Cuevana) and lack of presence in the region (local know-how).There are many competitors that already exist or will beef up their offers to compete such as: Terra (Telefonica), DLA (recently purchased by America Movil), Bazuca (VTR Chile/Liberty), Yuzu (Maxcom Mexico), among others.I look forward to continue reading your blog great stuff!

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About Pay Dirt

  • Pay Dirt examines the millions of consumer decisions Americans make every day: What to buy, how much to pay, whether to rave or complain. Lead written by Quentin Fottrell, the blog examines these interactions, providing readers with news, insight and tips on shopping, spending, customer service, and companies that do right – and wrong – by their customers. Send items, questions and comments to quentin.fottrell@dowjones.com or tweet @SMPayDirt.