OTT market and Netflix
It’s important to consider how Netflix (NFLX) will fare in relation to its competitors post–price increase of its standard plan.
Netflix mainly competes with Hulu and Amazon’s (AMZN) Prime Instant Video service in the OTT (over-the-top) market. Hulu is jointly owned by 21st Century Fox (FOXA), Comcast’s (CMCSA) NBCUniversal, and The Walt Disney Company (DIS).
How Netflix’s competitors measure up
As the above chart indicates, even after the price increase of its standard plan from $8.99 to $9.99 per month, Netflix will still be the cheaper plan as compared to Hulu.
It’s important to note that Hulu is ramping up its content. Content provider Epix moved to Hulu after its deal lapsed with Netflix. Hulu is the second-largest streaming platform in the United States and has close to ten million US customers.
On the other hand, Amazon’s Prime membership is priced at $99 a year, which turns out to be ~$8 per month. Prime membership offers not only videos, but also unlimited free shipping on many items purchased on Amazon.com and access to a library where thousands of books can be borrowed and read for free on a Kindle device. For more information, you can read Amazon now also Offers Prime Video Downloads for iOS and Android.
In comparison, at a cost of $10 per month on average, Netflix’s membership plans offer only video streaming services.
Given that bigger competitors such as Amazon are quickly following in Netflix’s footsteps in terms of strategy, who will win the battle for subscribers in the OTT market remains to be seen.
You can get diversified exposure to Netflix by investing in the PowerShares QQQ Trust, Series 1 ETF (QQQ), which holds 0.95% of the stock.