Ready For Prime Time

22 02 2011

I love a good price war.

When I was a young lad in the late-60s, I remember watching to my Dad the Accountant savoring gas price wars. On one particular trip from Chicago to Amarillo along Route 66, I recall us stopping in Joplin for gas. Dealers were at war, with attendants out front armed with numbers to manually change the signage in response to the guy across the street.

Oh, to get gas to 25 cents a gallon again. You couldn’t fill a soda can for 25 cents now.

But price wars continue in many avenues of retail. Like movies.

It was just one month ago that Amazon bought LoveFilm, Europe’s version of Netflix. It quickly became apparent that Amazon was digging in its heels, albeit on a different continent. The battle for movie supremacy ratcheted up. Sabers rattled; strategic missiles were readied and aimed.

But now Amazon has decided to take on Netflix within the US. The Amazon site now greets visitors with a letter from Jeff Bezos, Founder and CEO, in which he announces all Amazon Prime members will have unlimited streaming access to 5000 movies and TV shows.

Amazon Prime costs $79 per year, and is designed for regular customers. Unlimited two-day shipping is included in the price. But now members will have access to a fairly impressive amount of streaming video content as well.

In comparison, Netflix charges $7.99 per month (its most basic membership), which includes DVD rentals one at a time, as well as access to 11,565 streaming movies and shows. This amounts to about $96 per year.

But there is one huge difference between the two offers: When you are done watching a movie on Netflix, there is nothing left to do or buy. On Amazon you can go shopping.

And therein lies the sheer genius of this move. Whereas Amazon Prime may have only appealed to frequent customers in the past, suddenly $79 becomes a lot more palatable. Even if you only come for the movies, it’s a bargain. Add in free shipping and the tea starts to taste pretty sweet.

You might be wondering where some of the other big players are in all of this. Apparently nowhere to be found. Walmart is silent, its own e-commerce portal a joke (I gave up trying to buy something there a year ago, never to return). Perhaps if you consider the primary target market for Walmart (even looked at, the answer is obvious.

But Target is also missing. Regional player Hastings is mum. And Blockbuster…well, let’s just say they’re trying to decide whether proper burial or cremation is in order. All of these companies have much at stake in the sale and/or rental of movies.

If anything, the emergence and success of relative newcomers like Amazon (1995) and Netflix (1997) points to the fact that no company or industry is immune to change, and that mom-and-pop businesses can still be born like chicks from eggs. Old-economy companies are left wondering what hit them, while the two young bucks are sprinting ahead with nary a look over their shoulders.

Like my Dad, I am almost giddy at watching this price war play out. Amazon will no doubt increase the number of streaming titles, and perhaps Netflix will lower its price even more (it has already dropped $1 in the past three months). I can picture their programmers sitting at terminals, ready to change prices like gas station attendants some 40 years ago.

And I kinda like the view.

Dr “Fill ‘Er Up!” Gerlich



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