Is Netflix Success a Threat to Amazon?

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24/7 Wall St. Insights

• Netflix Inc.'s ( NASDAQ: NFLX ) blowout quarterly results suggest it is dominating its rivals.
• Cutting into Amazon.com Inc.'s ( NASDAQ: AMZN ) Prime Video success could hurt its overall revenue.
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Netflix Inc. ( NASDAQ: NFLX ) had a blowout quarter . Global subscribers rose to 283 million from 247 million in the same quarter the year before. Revenue rose 15% to $9.8 billion. Per-share earnings rose from $3.73 to $5.40. The question is whether this level of growth threatens its competitors because many households have only a few streaming subscriptions. Among the most likely candidates threatened by the success is Amazon.com Inc. ( NASDAQ: AMZN ) Prime Video, which has just over 200 million subscribers.

Most Americans have three or four paid streaming services, depending on which research experts use. Last year, Deloitte estimated four paid per household. Many services are competing for that real estate. Among the larger ones are Disney+, Hulu, Max (formerly HBO Max), Paramount+, and Peacock. Apple TV+ is much smaller, but the Apple Inc. ( NASDAQ: AAPL ) financial war chest means it can take years to build its service. It also has over 2 billion hardware devices to which it can market.

Amazon does not break out of its streaming service revenue. It is included in its North American e-commerce figures. Amazon offers video as part of its broader Prime membership, including free shipping and special discounts. A full Prime membership costs $14.99 a month. People can get Amazon Prime Video alone for $8.99. Amazon sometimes puts advertising in the video. For an additional $2.99, the content is ad-free.

Outsiders do not know how vital Prime Video is to selling Prime memberships. Some data shows that Prime members spend more on Amazon than people who do not have the service.

Does Netflix cut into Amazon’s Prime revenue? If so, it threatens more than Amazon’s streaming business.

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