The discount Internet retailer is launching a new video-on-demand, or VOD, service later this year to rival Amazon Prime Video as part of its effort to quintuple enrollment in its member loyalty program. CEO Patrick Byrne said Overstock already has the traffic to make the service viable, and with some 30,000 titles at the ready, it has the content too.
"We're looking for a bigger and bigger share of (Amazon's) wallet," said Byrne.
But details were otherwise sketchy on exactly how Overstock will develop its service, including how much it would charge and what titles would be offered. And there are a number of other indicators that explain why yet another me-too streaming video service might come up short:
- Overstock is way late to the game
- There have been plenty of companies that launched VOD services and failed, including Redbox owner Outerwall and Streampix from cable operator Comcast.
- Amazon has tens of millions of subscribers and more than 50,000 movies and TV shows available for its Prime members to stream
- Netflix recently crowed it had 57 million subscribers in 50 countries and over 2 billion hours of TV shows and movies available, albeit not all in streaming.
With all of these factors going against it, why does Overstock believe it can be more successful than those who have tried and failed?
As if the field isn't already crowded
First, Overstock says the market wants a pure-play mass merchant competitor also offering digital distribution. It says it's second only to Amazon in that respect so it's natural to be the one to challenge it.
Second, the Internet discounter plans to link the new video streaming service to its Club O member loyalty program. Like Amazon Prime, it offers members free shipping on products, but where Amazon charges $99 a year for its program, Overstock only charges $20, and it pays back members anywhere from 5%-25% of what they spend.
CEO Byrne says Club O is growing at triple-digit rates, and he expects the loyalty program to hit 10 million members by the end of 2015 -- with the new VOD service propelling those numbers higher. For comparison, Amazon, said 10 million people tried its Prime service this past holiday season.
How will Overstock attract customers?
Byrne says one of the most compelling aspects of the service will be its price, but the pricing details are unclear. Amazon Instant Video is offered free of charge to Prime members, while both Netflix and Hulu Plus start service plans that begin at $7.99 per month.
Byrne also points out that Overstock has sold billions of dollars worth of media over its history, and through its analytics program can zero in on what its customers want. And like Netflix and Amazon, Overstock says it too wants to develop original programming.
That could also put it in competition with rival services that have announced plans to branch out. HBO, for example, is planning a stand-alone service and Dish Network is looking to package a few of its channels like ESPN and TNT into a separate fee-based service through its new Sling TV. Additionally, there are dozens of niche providers offering content, not to mention mass retailers like Wal-Mart (NYSE:WMT) and Target that entered this market too.
Wal-Mart also just made available the Vudu Spark streaming media dongle to compete against Google's Chromecast and Amazon's own Fire TV Stick, which it notes is the fastest-selling Amazon device ever. And let's not forget Netflix (NASDAQ:NFLX) and Hulu.
Suffice it to say, Overstock will have its fair share of industry competitors.
Time to let go of your cable
It's true that there exists a perceived willingness of consumers to cut the cord with their cable TV provider, and content providers have cited the opportunity to tap into a potential universe of 10 million-15 million households looking for alternatives. While that suggests streaming-based services could be lucrative, just how many options will viewers need?
And Overstock has the added hurdle of acquiring greater brand recognition. It might have tens of millions of unique visitors to its site every month, but data from Statista.com says the Internet retailer didn't even make the top 10 list of most popular retail websites in the third quarter. (Of course, Amazon.com was first with 168 million monthly visitors, but eBay, Apple, Wal-Mart, and Target rounded out the top five. Even troubled retailer Sears Holding was on the list at No. 10.)
Ultimately, investors will need more details of Overstock's venture before deciding whether yet another video on demand service will be viable. In the meantime, it seems the only thing Overstock.com will be taking from Amazon's wallet will be its pocket change.
Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, eBay, Google (C shares), and Netflix. The Motley Fool owns shares of Amazon.com, Apple, eBay, Google (C shares), and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.