Why Amazon and Hulu Can’t Replace Netflix, According to Netflix CEO

Yesterday Netflix CEO Reed Hastings unleashed his quarterly shareholder letter on the web, chock full of facts and figures about the company’s success, growth and initiatives in Q4 2012.  But in addition to revealing numbers about Netflix members, profits, and original series, shareholders got to feast their eyes on a special little nugget—a Venn diagram proving that Netflix is irreplaceable by Hulu Plus, Amazon Prime and Redbox Instant—at least in terms of their streaming content offerings.

Online video streaming connoisseurs love to complain about Netflix’s streaming offering—”Ugh, I had to watch ‘A Night At The Roxbury’ again last night ‘cause there’s nothing good streaming on Netflix!”  But Hastings points out that today Netflix is streaming a whole lot of content that simply isn’t available through other streaming services (though he also addresses the fact that these services offer content that isn’t available on Netflix as well):

“Amazon Prime, Redbox Instant, and Hulu also offer low-cost streaming offerings, and they have some of the same content that Netflix has, as well as some unique content.  The more unique content they have (for example, ‘Battleground’ and ‘Community’ on Hulu, or ‘Falling Skies’ and ‘The Closer’ on Amazon Prime), the more they are a different service than ours.  To the degree they have some of the same content as Netflix, they are potentially a substitute for Netflix.  To examine this, we looked at the top 200 titles on Netflix: our 100 most popular movies and our 100 most popular TV shows in Q4.  Of these 200, 113 are not on Amazon Prime, Hulu Plus or Redbox Instant.  Of the 87 that are available on at least one of these services, Hulu Plus offers 27 of the 200; Amazon Prime 73 of the 200; and Redbox Instant 12 of the 200, with significant overlap in TV between Hulu Plus and Amazon Prime, and in movies between Amazon Prime and Redbox Instant.  In other words, when it comes to the most popular content with members on Netflix, none of these services are good substitutes to Netflix.”

Hastings adds, “When it comes to competition, we not only have a superior content offering due to our larger budget, but we are further along the experience curve when it comes to improving our user interface and delivering great quality streaming.  For all these reasons, Netflix continues to add members rapidly.”

And adding members rapidly, it is!  According to Hastings shareholders letter the company “added nearly 10 million global streaming members in 2012, we grew to over 33 million global streaming members, we generated profits for the year 2012, despite large international investments establishing Netflix in 40 countries around the world, and we developed several major original series, which debut this year.”

But let’s play devil’s advocate for a moment here and ask whether the top 200 titles on Netflix are really titles that people want to watch or whether they are simply watching by default because the movies and TV shows they really want to watch aren’t streaming on Netflix (and speaking of The Devil’s Advocate – there’s a good movie that’s not available on Netflix but is available on Amazon Instant Video, though you’ll have to pay to rent that one).

Is it really fair to rate the offerings of competitors Hulu, Redbox and Amazon based on Netflix’s own offering, which is admittedly thought of as shoddy by many Netflix users?  What do you think?  We’d love to hear your thoughts in the comments below.

Megan O’Neill is the resident web video expert here at Social Times.  Megan covers everything from the latest viral videos to online video news and tips, and has a passion for bizarre, original and revolutionary content and ideas.

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