Late last week, Amazon announced its quarterly earnings--which disappointed Wall Street by failing to meet expectations. During the earnings conference call, executives mentioned a potential price hike (from $20 to $40) for its Amazon Prime service. Prime is a membership that allows for expedited shipping and access to a large catalog of streaming video--including original series such as Alpha House and other titles from Amazon Studios.
Immediately, there was speculation throughout the industry about what this potential price increase could mean for Prime Instant Video (PIV)--and the ongoing battle between Amazon and Netflix.
My take? The price hike for Prime will likely not have a material impact on PIV, since it has the benefit of "hiding" behind the overall Prime cost (and benefits).
My supposition is that most Prime members (myself included) justify the $79 annual cost of Prime through the savings and benefits of the "free" 2-day shipping. I'd be surprised if there's a material number of customers who purchased Prime just for PIV. This becomes even more likely in the case of AmazonFresh and its $299 annual cost.
Prime includes free two-day shipping, access to PIV and access to a Kindle library. By reducing the cost/friction for ordering physical goods and providing free access to thousands of digital goods, Amazon can view PIV beyond the "video" lens--it can also be used as a loss-leader to build value for the Kindle (as PIV is not available on all Android devices) and cross-promotion of related goods (digital and physical).
On PIV, you could watch a video where the lead character eats breakfast, reads a book and then drives off into the sunset. But Amazon can also lend you the Kindle eBook, sell you the book (paperback? hardcover? digital?), deliver you eggs via Fresh and even deliver you the car...
Netflix is "just" a [really good] video catalog and every subscriber weighs every dollar directly against that video experience. Once PIV is offered as a standalone offering, it will be in a true fist fight with Netflix. Until then, PIV can be just "good enough" until Amazon's patient--but disruptive--leadership decides to take the gloves off.
Do you think that time is coming soon? Let me know in the comments.