Amazon is now encroaching into Netflix’s space by hosting numerous
movies and shows that can be rented. It has expanded the Amazon prime service
to stream movies along with enabling sharing of e-books. One of the biggest
similarities in this new Avatar is its similarity to Netflix’s pricing model.
The prime service can be purchased at $7.99 per-month or for $79 for a year.
This pricing is interesting because its cost per month is higher
than that of the annual subscription. It is important to notice though, that
these prices are aimed for two types of customers, first is the commitment-shy customer, who would rather buy a temporary contract than a yearlong commitment. The
second type are the current subscribers of Netflix or
Hulu who for the same price are getting only the video(streaming or DVD) service.
This move can disrupt the already ailing paid streaming services.
With years of work, amazon has an impressive movie library. It has penetrated
deep into the middle class user base through enormous ‘kindle’ sales and free 2
day shipping (through amazon prime). Considering all these measures can help
the existing customers and if this is sustainable and repeatable, Amazon will
continue its dominance in the market.
In the short run too, this move will help Amazon to generate
tremendous sales before the holidays.
As one of the investors mentions, “While one risk for Amazon is that
consumers use Prime for just one month to take advantage of free shipping on
large purchases, the test could also reveal that a ready market for alternative
pricing, and serve as a new customer acquisition tool,”.
So it will be exciting
to notice how a giant company pivots to remain in-sync with the customer
requirements.
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