Netflix and Amazon Prime are fiercely competitive, offering rival subscription video-on-demand (SVOD) services. Discover their history – and how streaming has affected both companies’ share prices – here.
|Company||Netflix Inc (NFLX)||Amazon.com Inc (AMZN)|
Reed HastingsMarc Randolph
|Headquarters||Los Gatos, California||Seattle, Washington|
In 2011, Netflix decided to separate its DVD-by-mail and streaming services, with the former being rebranded under a new umbrella: Qwikster. Though this rebrand was quickly reversed, Netflix continued to enforce a new policy whereby customers wishing to use both its services would now require two separate subscriptions.
The company lost 800,000 subscribers as a result of the debacle, with its share price falling from $272 in June 2011 to $71 by the end of the year.1 However, the incident was the clearest statement yet that Netflix saw the future of its business in streaming.
Around this time, both Amazon and Netflix began to branch out into producing original content. The first Netflix Originals show – ‘House of Cards’ – streamed in February 2013, followed by the first Amazon Studios shows in April 2013.
Since then, both firms have continued to invest heavily in original content. Popular Netflix Originals include ‘Orange Is The New Black’ and ‘Stranger Things,’ while Amazon has produced hits including ‘The Grand Tour’ and ‘The Man In The High Castle.’
Following expansion into a limited number of new territories between 2013 and 2015, both companies finally went global in 2016. Amazon’s rebranded service – Amazon Prime Video – became available in over 200 countries, while Netflix became available everywhere except China, Syria, North Korea and Crimea. Netflix also signed a deal with iQiYi, allowing it to distribute its original content in China, in 2017.
By this time, DVD-by-mail subscribers were on the decline. Amazon took the decision to shut LoveFilm for good in 2017, while Netflix quietly rebranded its service as DVD.com, a Netflix company, in 2016. It continues to operate with over 3.5 million subscribers (end of Q3 2017).
Amazon stock went from $257 at the start of 2013 to $1169 by the end of 2017, while Netflix shares rose from $92 to $192 over the same period (following a stock split in 2015).1
Today, both Amazon and Netflix continue to invest heavily in original programming to secure market share, reinvesting profits and increasing debt levels to fund content production. For example, Netflix spent $6 billion on content in 2016 – while announcing that it expected its content budget to rise – and Amazon is estimated to have spent $4.5 billion in 2017 (according to analysis by JPMorgan) with no signs of slowing down.
The reason for this heavy investment is that both Netflix and Amazon Prime Video need their own intellectual property (IP) to protect against new entrants, particularly cash-rich tech firms such as Facebook, Google and Apple, which have the potential to outbid them for popular titles. Existing studios and networks also pose a threat as they control extensive back catalogues, and could launch rival services. Netflix appears particularly exposed as it has few alternative revenue streams compared to Amazon Prime, which offers a range of bundled services in many territories.
Netflix founded as DVD-by-mail rental service
Netflix changes to subscription model
Netflix introduces streaming
Netflix rebrands its DVD-by-mail business as Qwikster. Reverses the decision soon after
First Netflix Original shows air
Netflix goes global
Netflix has 109 million streaming subscribers
Amazon Prime launched in US
Amazon Prime goes international
Amazon Prime Instant Video introduced
First Amazon Studios shows air
Amazon Prime Video goes global
Amazon has an estimated 90 million Prime members in the US alone (JPMorgan)
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