February 2014

FLASH INSIGHT
Amazon Prime Instant Video
The online retail giant is rebranding its
Lovefilm SVoD offering a...
Copyright

This document is intended for your personal use only.

The distribution is permitted only in an unaltered form....
The rebranding and repackaging to Amazon Prime Instant Video significantly lowers
the overall price point for SVoD service...
Amazon Prime Instant Video is a subscription-based on demand video platform, tied
to the Amazon Prime membership for faste...
With Prime Instant Video and the Instant Video Shop, Amazon strategically
strengthens its distribution outlets for video c...
Amazon positions its new SVoD service as a low-cost option, and thus significantly
widens the price range for SVoD service...
Amazon could quickly gain market share compared to the Lovefilm offering due to
the very low price point, but the sustaina...
MSC introduced the productized market intelligence service veed in 2014, covering
content and feature offerings of DTV and...
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Amazon Prime Instant Video

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With the launch of Amazon Prime Instant Video, the online retail giant is rebranding its Lovefilm SVoD offering and tying it to Amazon Prime in Germany. The management consultancy Mücke, Sturm & Company (MS&C) is analyzing the implications that this move of Amazon might have for the SVoD services on the German market. MS&C offers authoritative and comprehensive expertise in the fields of TV, IPTV and online video and gives in-depth insights about the developments of the TV market on a regular basis. More information under: http://muecke-sturm.de/de

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Amazon Prime Instant Video

  1. 1. February 2014 FLASH INSIGHT Amazon Prime Instant Video The online retail giant is rebranding its Lovefilm SVoD offering and tying it to Amazon Prime in Germany
  2. 2. Copyright This document is intended for your personal use only. The distribution is permitted only in an unaltered form. The use of the contents and graphics in other documents is permitted only with the prior consent of MÜCKE, STURM & COMPANY and requires proper citation. The texts and figures in this document have been compiled by MÜCKE, STURM & COMPANY within a presentation; they are no comprehensive documentation of the overall event. All of the company names, logos, brands, trademarks, registered trademarks and products used in this document are sole property of the corresponding companies and are used for illustrative purposes only. 1
  3. 3. The rebranding and repackaging to Amazon Prime Instant Video significantly lowers the overall price point for SVoD services in the German market. Management Summary Proposition Unlimited and ad-free streaming of movies & shows, complemented by a TVoD offering (Amazon Instant Video Shop), a rent by mail service (Lovefilm DVD) and a DVD/ Blu-ray outlet (amazon.com) Differentiator Very low price point and tied to Amazon Prime membership which includes free next day delivery for amazon.com goods and access to the Amazon Kindle eBook library; on the other hand, the formerly bundled Lovefilm rent by mail DVD service is no longer a differentiator for the SVoD service Market Position Amazon significantly lowers the price point for SVoD services in the German market some months before the expected market entry of Netflix, creating a low-cost alternative to incumbent Maxdome, current media darling Watchever and Sky’s recently introduced snap Amazon Video Portfolio Besides Amazon Prime Instant Video, Amazon also offers products and services in other video content market segment; therefore, Instant Video potentially strengthens Amazons overall video content ecosystem and the expected Amazon media streaming box Amazon Instant Outlook With its low price point and amazon.com’s strong position in the German online retail market, Amazon could potentially quickly gain market share and effectively block other market entrants such as Netflix Source: veed analytics, Mücke, Sturm & Company analysis 2
  4. 4. Amazon Prime Instant Video is a subscription-based on demand video platform, tied to the Amazon Prime membership for faster and free amazon.com delivery. Amazon Prime Instant Video: Details Strategic Rationale  With the rebranding and repackaging, Amazon strengthens its already existing SVoD service Lovefilm by tying it to the attractive next day delivery service for the amazon.com retail platform  The very low price point potentially blocks a segment of the German SVoD market for other competitors Offering Details  Proposition: unlimited and ad-free streaming of movies & shows  Pricing: 49€/ year Amazon Prime membership includes access to Prime Instant Videos; a monthly standalone subscription to Prime Instant Video is also available for 7.99€/ month  Content: about 12,000 titles partly in HD quality consisting of series, movies, and documentaries, also including some exclusive Amazon Studios shows such as Alpha House  Devices: PC, Mac, Smart TVs, iPad, iPhone, Android Smartphones  Amazon Prime membership also includes next day free delivery service and access to Amazon Kindle eBook library Amazon Prime Instant Video iPad App Source: veed analytics  The rent by mail service for DVDs will be continued by the Lovefilm brand in Germany 3
  5. 5. With Prime Instant Video and the Instant Video Shop, Amazon strategically strengthens its distribution outlets for video content. Amazon Video Portfolio Video Content Production  In 2010 Amazon started its Amazon Studios initiative to develop and produce movies, TV shows and comics  Amazon Studios provides high profile exclusive shows such as Alpha House for Instant Video Video Content Discovery  In 1998 Amazon acquired the leading internet movie database IMDb  With IMDb, Amazon has access to a vast amount of video-related data Source: Mücke, Sturm & Company analysis Video Content Distribution  Amazon.com massively sells DVDs/ Blu-rays  The Lovefilm brand still operates as a rent by mail service  Prime Instant Video offers subscription-based, and the Instant Video Shop transaction-based access to movies and shows Video Content Consumption  CE such as TV sets are key products sold on amazon.com  The kindle can also be used to consume video content  Amazon is expected to launch an own media streaming box in 2014 ? Media Box 4
  6. 6. Amazon positions its new SVoD service as a low-cost option, and thus significantly widens the price range for SVoD services in the German market. Market Position 10€  snap by Sky is the SVoD service with the highest price point of 9,90€ and offers the smallest content selection, but puts an emphasis on its high profile HBO content 1 price per month 8€ 2 expected 6€  Netflix is expected to launch in Germany late 2014 in the price range of 7€ to 9€ per month, but with an extensive content catalogue from scratch 4€ 1 2€  Watchever and Maxdome both follow the same price point of 8,99€/ month, but the incumbent service Maxdome still offers the by far largest content catalogue (yet)  Lovefilm already had the lowest price point of 6,99€/ month, but with Prime Instant Video Amazon puts the price point even lower to only 4,08€/ month (49€/ year) 2 Before: 2,91€ range 6,99€ - 9,90€ 10k 20k After: 5,82€ range 4,08€ - 9,90€ 30k 40k 50k content catalogue size Source: veed analytics 5
  7. 7. Amazon could quickly gain market share compared to the Lovefilm offering due to the very low price point, but the sustainability of this model needs to be proven. Outlook Drivers of Prime Instant Video Hurdles for Prime Instant Video + Amazon already negotiated a large amount of content deals for Lovefilm, thus enabling a quick start for Prime Instant Video with about 12.000 on demand titles + Potentially Amazon can offer exclusive content via Prime Instant Video such as Alpha House + Amazon is a very strong brand in Germany, and next day delivery an attractive amazon.com feature + Instant Video could function as the pre-installed SVoD service on Amazon devices such as the kindle and the expected media box - The Lovefilm VoD service was known for a poor browser-based customer experience - Compared to Lovefilm, Instant Video loses the differentiating bundled rent by mail DVD service - When Netflix temporarily decoupled rent by mail service and streaming offering in 2012, customers severely rebelled against this move - With Maxdome, Watchever and snap three strongly backed SVoD services already are present on the German market, with Netflix waiting just around the corner We are constantly analyzing industry trends and developments in the sector of technology, media and telecommunications. If you would like to discuss the impact of Amazon Prime Instant Video on your business, please get in touch with: Patrick Sturm Managing Partner p.sturm@muecke-sturm.de Amazon SVoD customer potential 2014: 1,0-1,5 Mio. Source: veed analytics, Mücke, Sturm & Company analysis 6
  8. 8. MSC introduced the productized market intelligence service veed in 2014, covering content and feature offerings of DTV and OTT services worldwide. Intelligence source: veed service details veed is subscription-based access to:  Continuously updated veed database,  Periodical veed insight reports and  Analyst sessions on DTV and OTT services the veed content module:  Content categories offered (live TV, catch up and VoD), included channels and channel quality,  Complete view on the packaging and pricing approach the veed feaure module:  Details on feature sets per feature category,  Set-top box specs for DTV services,  How features are supported across devices veed video services intelligence Subscribe to veed, if you would like to understand in detail  Which features Amazon Prime Instant Video offers,  Which devices are being supported,  How much content the service offers,  How this evolves within the next months,  How this relates to the competitors and  How this effects your business! www.veed-analytics.com 7
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