This deal adds "thousands of new releases, classic library titles, and original programs" to Amazon Prime. The Epix catalog is populated by joint owners Viacom, Lions Gate Entertainment
Lions Gate brings The Hunger Games to the party, but not until that film moves out of the exclusive DVD distribution window. When it does, that blockbuster will hit Amazon Prime and Netflix simultaneously. So will Marvel's The Avengers. Amazon is happy to point out these upcoming titles in its press materials, but the prominent blurb on Amazon's homepage wisely focuses on what's available right now.
Investors are taking this as a direct threat to Netflix's livelihood. Shares plunged as much as 11% on the news.
You should've seen this coming a mile away
Here's the thing: Amazon's partnership with Epix is indeed news, but hardly a shock.
Netflix investors have known that the exclusive deal was becoming an open marriage since it was first announced. Coinstar's
So where's the big surprise? I don't see one. This looks like a classic case of nervous retail investors leaping to conclusions. This looks like a shocker on the surface, but only if you don't know Netflix that well. The end of the exclusive lockup period was discussed on the last earnings call, for goodness' sakes.
Amazon 1, Netflix 0? Not so fast!
It's not as if Amazon suddenly matched Netflix in every department. The company now boasts 25,000 titles under the Prime umbrella, but Netflix owns more than twice that many licenses. Advantage, still Netflix.
Netflix also holds a solid lead in hardware integration. Amazon has no answer for the recommendation engine, and users find that Netflix offers a far more intuitive rental experience -- all those years of spit-shining the online interface are paying off.
The Prime service is 18% cheaper than Netflix streams and also includes free two-day shipping when you shop at Amazon. And I suppose you could argue that Amazon's brand value trumps Netflix, especially in the wake of the Qwikster debacle of 2011. But I'm not entirely sure that Amazon has earned any consumer trust in the digital-video arena.
So Amazon may be a contender, but Netflix still holds several significant advantages over its rival, including a richer content library even after these new deals. These announcements did nothing to change my appraisal of Netflix, which is that domestic dominance plus international expansion add up to a massive business over the next five years. Feel free to treat this poorly motivated drop as another fantastic buy-in opportunity.
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