Rising competition for Netflix
Netflix (NFLX) continues to face strong competition in the United States, which could affect its domestic streaming memberships in fiscal 2017. Hulu is expected to launch its online television service this year, and Alphabet’s (GOOG) YouTube is planning to offer a video subscription streaming service similar to what Netflix (NFLX) offers. According to a report from TheStreet late last year, YouTube has signed agreements with CBS (CBS), 21st Century Fox (FOXA), and The Walt Disney Company (DIS) for the purpose of launching its own OTT (over-the-top) service.
With this service, Google would be yet another player in the crowded video subscription streaming market. Amazon’s (AMZN) Prime Video, Dish’s (DISH) Sling TV, and Sony’s Vue are among the other services aggressively trying to tap this growing market. Even Apple (AAPL) has long been negotiating with content providers for a similar service, but has failed to strike a deal with them so far. Let’s look at what could differentiate Netflix from its competitors.
The popularity of Netflix’s original programming could set it apart from competitors. However, companies are also focusing on increasing their original content, such as Amazon. It plans to triple the number of its original shows.
The above chart shows that Amazon’s spending on technology and content has been steadily rising. It rose from $3.2 billion in 3Q15 to $4.1 billion in 3Q16.
At the UBS Global Media and Communications Conference late last year, Netflix was asked whether it felt threatened by Amazon’s rising focus on original content. Netflix stated that, going by the “data consumption” reports on Sandvine and Shack Track, it didn’t appear that Amazon’s original shows were generating much buzz. Netflix stated that the original content could result in the sale of more Prime memberships for Amazon.