Amazon vs. Netflix

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Amazon vs. Netflix Netflix and Amazon both provide paid subscriber’s access to an expansive database of streamed video service. But with increasing competitors, limited content deals, and plagued with decreasing revenues, Netflix is likely a company that could soon be enveloped by a larger company that has a reputable name such as Amazon. The online streaming market is highly competitive. With companies bargaining and negotiating contracts for exclusive rights to media content, this environment makes it difficult for a company such as Netflix to continue to maintain its lead in the industry, and as a result, makes it a task to retain its customers. Contracts and a licensing issues are problems that plague the entire industry, but it is believed that Netflix turnovers its library/content faster than any of its competitors. Netflix does have an advantage over other companies; however. It has differentiated itself by offering DVD rentals for consumer viewing. DVDs are Netflix’s bread and butter; it contributes to more than half of its margin. Video streaming, in relation, only accounts to less than 10% of its contribution margin. Despite that fact, Netflix was set on spinning of its most profitable product until the backlash from customers had its board members rethinking their strategy. This strategy not only confused Wall Street (which ultimately led to its plummeted share price) but left many customers alienated. Another issue is that Redbox, a company that solely relies on offering popular movie content in a cost effective, vending machine-like delivery has undercut Netflix’s DVD sales, and in result, has seen its profit margins dwindle in the last few years. Enter Amazon. Amazon is in prime position to envelope the platform of Netflix. Amazon is far more reputable outside of the streaming video industry, as it is the world’s largest online retailer.

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