Netflix losing marketshare to Amazon

Netflix remains the runaway alternative TV provider in the US, but Amazon is growing at a faster rate, according to new research...and check out the low approval ratings.

US-based 451 Research regularly surveys US consumers about the non-traditional TV services for which they are paying. Netflix remains the market leader by a large margin with 82% of respondents paying for the service. However, that is down on the 84% recorded in February and comes as Amazon records large gains.
Amazon’s share jumped from 17% to 22% across the February-September period. Apple’s iTunes increased its share from 15% to 16% and Hulu’s premium service Hulu Plus’ share was up from 6% to 8%. There was a marked increase in the number of consumers paying for Amazon Instant Video and Netflix. The proportion paying for both services jumped from 14% to 18% across the period.
“While Netflix still holds the largest share by far of the paid alternative TV market, consumers continue to shift towards Amazon’s Instant Video service,” said Andy Golub of 451 Research’s ChangeWave service. “As Amazon’s TV and movie content becomes more competitive with Netflix, its popularity is surging among consumers.”
In terms of customer satisfaction, iTunes was the clear leader with a 35% approval rating. Netflix recorded a 23% rating and Amazon and Hulu Plus 22% and 20% respectively. Apple’s iPad took over Blu-ray players as the device used most often to watch streamed content.

OTT: Getting media to devices

The madness of Silicon Valley is it's eternal optimism and willful ignorance for why "it can't be done". This applies to the OTT (over the top) market space in spades. How many years have we been talking about getting our media outside of the usual cable/TV paradigm? Many. Companies bought in this space haven't amounted to much in profit/revenue. As examples, Comcast acquired thePlatform for $80M in 2006, while Y! acquired Maven Networks for $160M and both haven't produced much for either acquirers.

One of the biggest challenges has been around the content distribution rights, with Hollywood and large broadcasters holding back for fear of 1) the cable companies' wrath, and 2) their innate aversion to unproven distribution paths. Link this with the technology challenges and consumer's slow change in media consumption patterns and you have a recipe for lots of promises, not much action (aside from some juicy exits for startups). 

It's only in the past couple of years, with the advent of Netflix, Apple, Hulu, and now Amazon's very public push into devices that we're seeing real traction in this space. I tend to believe that it is the explosion in video-capable devices, the plummeting complexity of internet video, and the availability (finally) of some reasonable bandwidth that have combined to produce real change. We are seeing real services being rolled out with real adoption. Netflix, Apple, Hulu, Amazon have each committed heavily to win in this space.

So this begs the question: what do content producers do, how about the cable companies, telcos? Well, surprise, surprise, there is a maniacal push for each to build their own distribution mechanisms and offer OTT video. There are many billing plans: subscription, VOD, PPV, Ad-supported but they all have several aspects in common.

1) They all talk about getting media to end-user devices other than the traditional TV/PC. iPhone, iPad, Android, Roku, Connected TV, etc. These are the new battlegrounds for media delivery.

2) They all have some degree of anytime/anywhere, extending the promise that TIVO & Co brought with the advent of the DVR.

3) They all have limited content. ;-( Yes, the content guys are still reluctant to let their content go over new pathways. Understandably so. We're in a new era where the toll booths and roads are just being built. Content producers want to be the toll booth collector & distributor, only they also want to keep their traditional cable revenue streams going as well.

So to sum up: We're finally seeing meaningful traction in the OTT space. Netflix, Apple, Hulu, and Amazon are leading the way. Everyone wants a piece of the action and are pushing out OTT services that target new video-capable devices. Immediate winners: tech companies with OTT capabilities.

I'll dig into the main players - destination sites, content producers, cable, device manufacturers, and telcos -   in my next posts.