Few companies enjoy the kind of free press Amazon received when it launched Prime Instant Video on Tuesday. Twitter was ablaze with exultations for the new service, which allows paid Prime members to stream thousands of television shows and movies for no additional cost beyond the $79 yearly Prime subscription. I didn't understand the excitement at first. After all, don't most people with an interest in streaming video already have a Netflix subscription? And doesn't Netflix have a much broader offering? Yes, on both accounts. But Amazon has one serious advantage over Netflix, Hulu+ and (for posterity's sake) Blockbuster Online: It's free.
Amazon Prime has always cost $79, unless of course you're a student – students don't get access to Prime Instant Video, by the way – and at that price, it's already a compelling deal for frequent online shoppers. It's no difficult thing to make use of $79 in two-day shipping over the course of one year. Prime Instant Video is simply an addition to that service with no extra charge, something CEO Jeff Bezos says won't ever change, even when the video offering gets expanded.
Let's be frank. Amazon needs to expand the offering. Right now the list of 5,000+ shows and movies is missing a lot of high profile, high replay value content. Amazon only has two major studios, Sony Pictures and Warner Bros., a number that should grow but for now remains underwhelming. Even the independent studios, like PBS and the BBC, don't produce the kind of content that will thrill your average video streamer, and much of the content is at least a decade old. When compared to Netflix, which has deals with every major film studio and a load of TV production houses, Amazon looks less like an underdog and more like a dog that's ready for a trip behind the shed. Oh, look! Amazon has “Old Yeller.”
Launching with a feature list years behind the competition is usually a death sentence in the tech world. The most recent example that comes to mind is the Windows Phone. Microsoft was already late to the smartphone party. When the company launched Windows Phone without copy/paste and several other basic functions, it bought a billion-dollar plot in the tech cemetery. Mark my words, the Windows Phone will not recover, but Amazon probably will.
The streaming video industry is a lot different than the cellular industry. Innovation is almost nonexistent. We still don't have a one-stop shop for quality movies and current and legacy TV programming. I can't watch the first several episodes of this season's “30 Rock” without a Hulu+ subscription, which runs the same as Netflix and Blockbuster Online and has a much more limited movie selection. Hardware integration lags woefully behind the technological curve. The industry as a whole still has a lot of room to grow, which gives Amazon plenty of time to negotiate streaming deals with the remaining studios.
The real genius of the Prime Instant Video release is the price. While Amazon talks with studio execs, Prime customers will be familiarizing themselves with the Prime Instant Video brand. Some will love it, some will probably hate it, but because it's free I'd bet a huge chunk of the Prime subscriber base will use it. When the selection finally catches up to Netflix, anyone with both services will cancel Netflix. Make no mistake, Amazon's offering will catch up. The fact that Bezos already has Sony and Warner Bros. on board tells me he isn't pushing an outrageous licensing agenda. Any studio exec that sees Amazon hitting a price point $20 below the cheapest Netflix plan while also providing the Prime experience to its customers will be happy to get on board. It's just a matter of working out the details.