Content Wars: Amazon adds Fox

Amazon has announced that it will now offer movies and shows from FOX. This takes Amazon’s instant streaming offerings to 11,000 versus 20,000 for Netflix versus 5,000 for Blockbuster. The past week has seen several developments on the Content Wars front, with the release of Blockbuster’s Movie Pass and Netflix’s deal with Dreamworks.

Amazon’s announcement comes on the heels of its ‘Kindle Books through public libraries‘  deal. There are rumors of a Netflix for Books offering as well. It seems Amazon is adding content muscle in preparation for its Android Tablet.

FOX titles available to Prime members will include contemporary movies such as, “Speed,” “Mrs. Doubtfire,” “Doctor Dolittle,” “Last of the Mohicans,” and “Office Space,” as well as classics like “The Longest Day,” “All About Eve,” “9 to 5,” and “Butch Cassidy and the Sundance Kid.” FOX also brings to Prime members a selection of popular TV series including “24,” “The X-Files,” “NYPD Blue,” “Arrested Development,” “Buffy the Vampire Slayer,” “Ally McBeal,” and newly available on digital video, “The Wonder Years.”

via Amazon Announces Digital Video License Agreement With Twentieth Century Fox

Wither Netflix, Blockbuster Redux?

In 1998 Reed Hastings founded Netflix, the lar...

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Considerable online and print real estate has been dedicated to the recent announcements by Netflix and Blockbuster. However, it seems that neither company has paid much attention to the critical B word – bundling.

First, a recap.

Till recently, Netflix was the darling of Wall Street. It was also a much analyzed case study in class rooms. Netflix was toasted as an example of how to disrupt an industry with a new technology enabled offering. The success of Netflix was in many ways responsible for the bankruptcy of Blockbuster, which was a behemoth of the traditional movie rental market. Netflix offered a eat-as-much-as-you-can streaming option along with a 1, 2 or 3 DVD-in-the-mail option. Bundled together.

Then, Netflix did two things – first, it increased prices by 60%. Second, it announced a split of its bundle. It announced that streaming and DVD-in-mail services will be separated into two different companies, with different websites.

Outraged users have been leaving in droves. The Netflix stock is down by more than 50%.  However, this might just be the beginning. The real value destroying act is not the price increase, but it is the impending unbundling.

Blockbuster on the other hand, after being acquired by Dish Network, has announced a combined streaming, mail and on-demand service. It promises a 100,000 strong library and unlimited DVD / BR exchanges through its  numerous retail locations.  While the offering sounds strong at first look, the fine print shows that only Dish subscribers can avail of it.

Why did we get here?

Netflix clearly understands that digital streaming services are going to disrupt the industry, much like its DVD-in-the-mail plan did in the nineties and early noughties.  It also realizes that it has to increase the size of its streaming library, and hence pay top dollar to the content owners. These seem to be the most plausible reasons behind its recent actions. While this is a great strategy in the medium term, a medium term strategy is only good if you are able to survive the short-term.

What’s the bungling / bundling issue?

This Wikipedia article on bundling suggests

Bundling is most successful when:

Consumers appreciate the resulting simplification of the purchase decision and benefit from the joint performance of the combined product.

Netflix users appreciated the joint performance of the bundled product as it fulfilled two needs simultaneously:

  • I need to watch something, at this time.
  • I need to watch this thing, at some time.

With the unbundling of this product, Netflix users have been greatly inconvenienced. They have to pay 60% more, and have to spend much more time maintaining two separate queues of movies on two different websites. Consequently, they seem to be looking to shop elsewhere for their needs. For example, to meet their ‘I need to watch this thing, at some time’ need, they may go to iTunes or RedBox. Similarly, to meet their ‘I need to watch something, at this time’ need, they may turn to Blockbuster. Or so seems the thinking at Dish headquarters.

However, the bundle offered by Dish is a $30 quad-play. It contains the DVD, streaming and on-demand plus Dish cable. Hence it is more likely to appeal to customers who are primarily searching for a cable provider. Furthermore, reports suggest that Blockbuster’s streaming library is less than 5,000 titles – as compared to a paltry 20,000 for Netflix. Hence it is not a one for one replacement.

Clearly, both companies are bungling the bundling.

Thus there is now a large unmet for a bundle that offers unlimited streaming and DVD, at an affordable price, in a convenient manner. Netflix’s abandoning of this market has hurt it already and will certainly continue to hurt it in the short-term. If it is lucky and no serious competition arises during this period, then it may be able to flourish in the medium and long-term.

Storing Annotations on the Cloud: Kindle books at libraries

A Picture of a eBook

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Amazon has announced that Kindle books can now be borrowed from local libraries in the US. There are two key points to this announcement –

  1. Availability – these books will be available at over 11,000 local libraries.
  2. Advantage of ebooks over traditional paper books – customers will be able to take notes & make annotations (which Amazon will store, for free, on its amazing Amazon cloud). Thus if you borrow or buy the book in the future, your notes will still be there.

This may have major implications on consumer buying and consumption habits – for example, no more waiting for a book to get returned (assuming that there will be no limit to the number of Kindle copies of a book that are ‘stocked’ at a given library). Also, the books will feel like personal copies of the book due to the annotations.

Instant access and a personalized book reading experience – guess some folks may decide not to buy a copy of that ol’ book that they revisit once every few years!

Here is the Amazon press release – Kindle Books Now Available at over 11,000 Local Libraries.