By Doug Ehrman, The Motley Fool
Filed under: Investing
In the race for supremacy among streaming video services, original content has emerged as one of the critical differentiators that can allow one company to flourish where others flounder. A number of events, capped off with the release of the new original hit series “House of Cards,” has pushed Netflix back to the top of the pack. The stock has already doubled this year.
Before you get too excited, though, it is important to remember that the company’s two biggest competitors are not exactly stagnating. While Amazon’s Prime service and Coinstar’s venture with Verizon , Redbox Instant, have different focuses, they are coming hard for Netflix.
Content wars
Perhaps the single largest battleground on which streaming video services clash is on content; the technology side of the business is another differentiator and an area in which Netflix also excels. Because content is so important, and because gaining exclusive rights to content is so expensive, original content has become one of the most direct ways that video services seek to stand out. After a weak showing from its first attempt called “Lilyhammer,” the company has created a significant buzz with “House of Cards.”
The political thriller represents several firsts in programming: It is the first time a series has had an entire season released at once, has ever been developed with the aid of big data, and that completely circumvented traditional television or cable production release. The show, which stars Kevin Spacey and Robin Wright, has been extremely successful for Netflix. While specific user data has not been released, Chief Content Officer Ted Sarandos said that nearly everyone who watched the first episode also watched the second and it was one of the most-watched pieces of content on Netflix within a few weeks of its release.
Amazon understands the importance of content as well. Fellow Fool Steve Symington recently explained that CEO Jeff Bezos has explained with usual flair that his company is already spending more than $1 billion per year for content. Its Prime service recently secured exclusive rights to “Downton Abbey,” which is alone anticipated to attract new users. The service is also expected to pilot as many as a dozen of its own original shows in the near term .
The non-content incentives
In an attempt to compete with Netflix, both Amazon Prime and Redbox Instant offer ancillary benefits aimed at making each more competitive. Prime, which costs about $7 per month — less than a standard Netflix subscription — also gives subscribers free two-day shipping on all products offered by Amazon. Subscribers are also given one free book rental per month from the Kindle Owners’ Lending Library. The company’s strategy is constantly evolving to allow it to appeal to core Amazon users.
Redbox Instant offers subscribers four DVD rentals per month at its popular Redbox kiosks. The service costs the same as Netflix ($8 per month), but users who wish to forgo the DVD access can get streaming only for $6 …read more
Source: FULL ARTICLE at DailyFinance
