Things are heating up between Amazon.com (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX), as the Web warlords are vying for a bigger piece of the digital streaming market. Both companies are heavily investing in content creation, but will it be enough to stave off competition in the increasingly important streaming business?
Let's look at which company offers the best streaming bang for your buck, and which stock is a better bet for investors.
With so many digital streaming options available to consumers today, Amazon and Netflix are getting ahead by betting on original content and beefing up their video libraries. The world's largest online retailer first introduced its Amazon Instant Video service in 2011 as part of its Prime program.
For just $79 a year, Amazon Prime Members get free two-day shipping, unlimited streaming of movies and TV shows, and access to books in the Kindle Owners' Lending Library. Today, Amazon's content catalog has grown to include more than 140,000 videos.
In addition, Amazon Studios is now streaming 14 pilots free of charge to viewers whether or not they're Prime members. Viewers are then encouraged to vote on their favorite pilot. Amazon plans to develop those with the most votes into full series. Testing audience tastes is a smart plan for Amazon, particularly if it hopes to produce a runaway success like Netflix's House of Cards.
Neck and neck
Netflix's new hit series should continue to drive subscriber growth for Netflix, because you can't watch it anywhere else. However, compared with Amazon, Netflix offers fewer titles, with about 75,000 movies and TV shows.
In terms of cost to user, Netflix offers its streaming service for a monthly fee of $7.99. This means Amazon Prime members paying $79 per year save more than $1 per month over Netflix subscribers. Still, these price points are similar enough that it shouldn't make a material difference to consumers.
Ultimately, it comes down to consumer tastes. For this reason, I think Netflix is the more compelling streaming service today, despite Amazon's vast library of content. On the other hand, Amazon looks like the better stock to own. True, both of these stocks are wildly expensive at their current valuations. However, Amazon counts multiple revenue streams outside its streaming and entertainment business. As a result, the stock's future is far more certain than are shares of Netflix.