E-commerce behemoth Amazon is continuing its growth in the subscriptions space, with its streaming service and free shipping netting an even larger recurring revenue base. The number of Amazon Prime subscriptions has recently been estimated [press release] by Consumer Intelligence Research Partners (CIPR) to now have passed 100 million in the US.
Netflix doesn’t come up quite to the same numbers (in the US), but by any other comparison, they are very impressive.
So what’s behind these two players? We’ve compiled stats for the two along with analysis to help you understand the trends.
Netflix’s Success – And Some Reasons Why
Netflix’s share price has been volatile of late. But one growth rate remains constant – the growth in the number of its subscribers. Looking at the trend from Q2 2012 through Q4 2018, the cumulative trendline appears solidly consistent.
In Q2 2012, Netflix had 22.0 million subscribers in the US and 2.4 million internationally. Fast forward six and a half years, that US number has almost tripled to 58.5 million – but the international subscriber count has ballooned by more than 33x, reaching 80.8 million subscribers.
So, what is the secret to its success? For one part, high-speed connectivity is a factor in increased consumer technology spend – meaning that as connections become faster, watching video becomes more popular. Video streaming quality has seen significant improvements, and last year, technical company managers reported that they believed that the quality of online video service providers would soon match TV.
These factors apply to Amazon Prime viewing too, but the following points illustrate the strength of Netflix’s execution:
- Netflix has performed exceptionally well at building its brand, becoming the top brand for word-of-mouth and the second-ranking brand for advocacy according to YouGov.
- Its customer experience is simple for consumers to engage with, and the brand has become more and more synonymous with TV.
- Netflix is the place where viewers are most likely to find their favorite content, with 32% of US viewers saying they watch their favorite show on Netflix, compared to 26% on live TV. This represents an almost total reversal from 2014, when 45% had their top program on live TV compared to just 14% for the streaming service.
- Netflix – along with other streaming providers – is producing far more many hours of original scripted television than live TV providers. While US broadcast networks have seen a 2.3% compound annual decline in scripted hours, online services have soared ahead with a compound annual growth rate of 53%.
- This original content is highly valued by subscribers, with more than half (54%) signing up for a service to watch original content. Among Netflix subscribers in particular, 62% state that original shows play an absolutely critical or very important role in their decision to keep paying for the platform.
Amazon Prime Enjoys Its Own Growth
But how does Netflix’s video streaming competitor, Amazon Prime, compare? Well, it appears in many of the same brand ranking posts cited above, and many of the same factors drive its success too – for example, 61% of subscribers say that they would drop their subscription if Amazon Prime stopped featuring original content.
Amazon also benefits from the fact that it sells its own OTT devices, which are growing in popularity.
Amazon’s Jeff Bezos has famously said that “when we win a Golden Globe, it helps us sell more shoes.” The world’s richest man has also noted that Prime customers who stream videos not only renew at higher rates but also convert from free trials at higher rates.
Although it bases its estimates on a small sample size of 500 Amazon shoppers, the CIRP estimates definitely back up Jeff’s statement – the Prime shoppers in their sample said they spend an average of $1,400 per year, compared to $600 for those that are not Prime members. Some other points from CIRP’s estimates follow:
- US membership grew by 10% year-over-year for the period ending December 2018 – a slower rate of growth than previous years, but still significant on such a large base.
- Some 58% of Prime members pay for their membership annually, while 36% pay a monthly fee.
- Other Amazon Prime subscribers (7%) are either on a free trial, have membership on another basis (e.g. sharing) or don’t know.
