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Netflix's CEO Does Not Believe Amazon's Growth Will Hurt His Service

By Daniel B. Kline - Apr 24, 2016 at 8:00AM

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The streaming leader's boss believes that streaming growth by top-tier providers can be good for the whole industry.

While the media wants to portray Amazon's (AMZN 2.57%) move into offering stand-alone monthly subscriptions to its Prime Video service as a threat to Netflix (NFLX 4.15%), the streaming leader's CEO does not see it that way.

Instead, Reed Hastings sees the online retailer's efforts to grow its video service as being good for the streaming industry in general. He believes the market is undergoing a "natural evolution from linear TV to Internet TV," he said during an interview after the company reported its first-quarter numbers. Hastings clearly believes an increase in the number of streaming choices actually pushes consumers into cutting the cord, which is good for all streaming services.

"Their growth doesn't take away from us," he said.

What is Amazon doing?
The online retailer has decided to make its Prime Video service available for $8.99 a month -- $1 less than what Netflix charges. This is a big change for the company, which previously only offered its mix of original and repeat programs to members of its $99 a year Prime service.

This change reflects the fact that Prime Video, which was once viewed as a good-enough service designed to keep people paying $99 a year for Prime from leaving as the service's core offering of free two-day shipping became less attractive when books, video, and music moved to digital delivery, has improved. Now, while Netflix has more highly regarded originals, Amazon has some top-tier shows including Transparent and The Man in the High Castle.

Prime Video also has an enticing collection of children's programming, some original movies, and upcoming shows from Woody Allen and the former hosts of Top Gear.

In addition to the $8.99 monthly offering, which is just for video, the company will also offer a $10.99 a month plan that includes all of the benefits of Prime, including two-day shipping. It's worth noting that both of those plans end up costing more than $99 a year, but they should be enticing to people who don't want to shell out the full amount all at once. They may also appeal to customers who want to join for a period to watch a show or gain free shipping, then cancel.

Amazon has a wide-range of originals shows on Prime Video. Image source: Amazon.

Why is Netflix not concerned?
Instead of being worried about the increased competition, Hastings has nothing but kind words for his rivals.

"Hulu is doing some great work; Amazon is; HBO; Showtime," he said. "There are so many competitors and everyone is working hard to build the best content. We are seeing growth in the overall Internet TV market that is displacing linear TV, so it's natural that everybody is coming in as they realize that the future is Internet TV."

The CEO thinks his company's real rivals are pretty much anything else a consumer can do with his or her time.

"When you think about your own experience with what you'd do some night if you're not watching Netflix -- once in a while it's cable television; once in a while it's video gaming; it's browsing Facebook; killing time on the web," he said. "There is so much out there. Our only inhibitor in our growth is, how great is our service? Can we make it so there is never buffering and it always starts up instantly; so recommendations are incredible; and the content is exciting?"

Hastings explained that if the entire streaming industry can deliver top-quality experiences, then there will be room for everyone at the expense of not just cable, but all of the other forms of entertainment he listed.

Amazon is not a threat
Hastings is not just brushing off a competitor. He has a strong point because if people cut the cord with cable, they should then have money available to subscribe to multiple streaming services. As the leader in the field, Netflix simply has a better product than Amazon, Hulu, and maybe even HBO. As one of the, if not the top player in the field, Netflix can sit back and say, "the more the merrier."

Increased acceptance of streaming helps Netflix and Amazon be part of making that happen. More Prime Video customers does not mean fewer Netflix subscribers, and it could actually end up bringing more people to the party.

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