Why Amazon Should Acquire Netflix

As part of my 2009 Digital Media Predictions series, I said that Amazon should acquire or merge with eBay and/or Netflix. Both perspectives are coming… but first, Netflix:

Movie ticket sales are down. DVD and Blu Ray sales are down.

It’s indicative of the changing form of entertainment consumption (torrents, youtube, etc) and of the recession (why buy a $30 movie? Will you ever get $30 of value from it?). And it’s more than just movies – it’s music, newspapers and any other form of entertainment or consumption where the audience must ask, “is this worth paying for when there are so many other alternatives”?

And that’s where Netflix makes total sense to Amazon.

First, if you are going to buy a movie, you have two options: Amazon and iTunes. No other store should be visited because the pricing is unbeatable and search experience is perfectly simple.

But what happens if you no longer have an appetite for buying movies? Or if those movies – even at Amazon’s unbeatable price point – are just too expensive to justify one or two viewings (a question brought into focus thanks to the economy)?

What happens is that you find other alternatives - free and cheaper alternatives.

For those seeking free alternatives, there are countless torrent sites, hulu, and so forth. Not Amazon’s space (nor should it be). For those seeking cheaper alternatives, there is Netflix: unlimited movie rentals for less than the price of a single DVD. For around $15 a month, Anette and I receive 8-16 Blu Ray movies each month from Netflix (depending on what we are watching).

So why does Amazon + Netflix make sense? A few reasons:

1. In economic hardship or not, Netflix offers an alternative to movie purchasing… which I believe, over time, is eroding (just like music). Offering consumers the ability to either purchase a movie at a flat rate (ie $14.99) or renting it within a monthly subscription (ie $14.99) provides choice while still keeping buyers on Amazon.

2. I love Netflix’s service… but I despise Netflix.com and the site experience which, as I’ve written before, hasn’t changed for years. Amazon would immediately fix this by leveraging their best-in-class search and site experience – and integrating that into the core Amazon platform.

3. Amazon is the king of cross merchandising (except here!). With Netflix, Amazon would be able to bundle all sorts of other products, services and goodies that Netflix simply cannot. Renting National Lampoon’s Vacation? Why not buy the entire bundle for $24.99. Or why not keep the DVD for a reduced cost?

4. Amazon is also the king of inventory control and harnessing consumer demand / interest – and that plays into both sides with Netflix. Amazon is able to determine what inventory on Netflix’s or their side should, based on shifting user demand, be moved into sales or rentals. For instance, in six months, the gazillion copies of IronMan that Netflix had stocked are going to be far less valuable than they were at movie release… those copies are more valuable on Amazon than anywhere else (except perhaps eBay). Amazon could create their own media marketplace and sell the used goods after having already made money on those units via the subscription service.

5. Amazon’s Unbox service is cooler than it is successful. Netflix has their own streaming product service / box as well. Neither has made a big dent into Apple’s iTunes, Mac Mini and Apple TV market… but combined, they have greater leverage and flexibility. Perhaps Netflix + Unbox reaches the tipping point that Amazon has been missing. I would be willing to bet that an Amazon “On Demand” product hooked into my TV would be terrific and worth the money. Also creates a new avenue for Amazon to package its digital music offering.

6. A few other random thoughts / possibilities: - Both Netflix and Amazon are masters of shipping… might their be efficiencies or negotiating leverage in pricing? - Both companies spend a great deal on online marketing for media products… there are certainly efficiencies to be gained as a combined entity - Finally, does the combination of Amazon + Netflix allow for movement into new areas like Video Game rentals?

Amazon Kindle’s Biggest Threat: Apple’s iTunes & iPod Touch Tablet

After thinking more about yesterday’s post "Amazon Kindle + iPod Touch Tablet + Netbooks…?", I am convinced that the Amazon Kindle (which I’m a big fan of) is going to die at the hands of Apple. The Kindle is great – but at it’s core, it is an electronic book reader.

When Apple launches its forthcoming iPod Touch Tablet - you’ll have an ultra-sexy netbook with iTunes and all the other non-phone goodies Apple packages on it’s iPhone… and the book reader will be one possible feature.

iTunes already sells music, movies, television shows and applications… where are the books? Apple hasn’t had a device capable of delivering a good reading experience. But the iPod Tablet would change that. It would offer the same – and probably better – format that the Kindle does. It would be tied to your iTunes account such that you can manage all of your media files simply and from a single location.

And because it’s a netbook, you can access the internet to link out, subscribe to blogs, and so forth. Eliminating the downfall of the current Kindle (changes are coming in Kindle v2). The only thing lacking is Amazon’s constant connectivity through their wireless deal… but I suppose you could access your books on your iPhone as well (if you were so inclined) – or I am sure that AT&T would be willing to offer some monthly subscription / service.

Finally, inventory shouldn’t be an issue. Amazon has proven that authors and publishers are interested in selling electronically – and the sales numbers support its success. They’d gladly open up to another sales channel provided that Apple doesn’t screw them in the negotiated fee / revenue split.

Alas, much of this will come down to pricing. If the Kindle’s price doesn’t drop quickly, Apple will have an opportunity to take market share with a comparably priced Tablet… at prices anywhere near one another, the Tablet will win because it offers so much more in addition to e-books. But if the Kindle can handily win the pricing war… and solve inventory woes… conusmuers will have to ask if the Tablet’s extra features justify the higher price tag.

Amazon Kindle + iPod Touch Tablet + Netbooks...?

Three related meme's have gathered steam this week: 1. Q4 2008 and 2009: Year of the Netbook 2. The large form Apple Touch 3. Memo to Jeff Bezos: My interest in the Kindle is waning

So what do these all have to do with one another?

Simple: it's a race to be the first great, dominant netbook. After all, that's really what a large screen iPhone / iPod Tablet would be. And to a degree, it's what the missing ingredient for the Amazon Kindle. And the form factor of the Touch and the Kindle are what current netbooks are missing.

I love the prospects of the Kindle (and I love Amazon...), but Apple has the inside edge here. Turning the iPhone or Touch into a tablet is far easier than converting the Kindle or recomposing current netbooks. Furthermore, Apple already has thousands of apps to launch with (adding content and gaming) and can turn iTunes into an Amazon eBooks competitor.

Craigslist, eBay & Amazon: 2008 Trending & Site Efficiency

I've always been struck by the different experiences Craigslist, Amazon and eBay offer. For certain needs and products, each has it's own positives / negatives. For instance, all of our household products (from toiletries to electronics to groceries) are purchased on Amazon; our time sensitive and high-value products are sold on Craiglist; and our unique products are bought / sold on eBay. As 2008 wraps up today, I plotted data from each of those big three against each other. The results are fascinating.

Unique Visitors

eBay entered 2008 more than twice the size of Craigslist and 33% larger than Amazon. But while eBay dropped significantly and Amazon flattened - Craigslist grew from less than 30m monthly uniques to over 40m... approaching the traditional big boys. But both eBay and Amazon saw huge growth in Q4 while Craigslist (which is not an ideal experience for end-of-season shopping) flattened. Interesting questions arise out of this:

- How large a role does holiday pricing and incentives play for Amazon and eBay? - Conceptually, eBay and Craigslist shouldn't see drastically different swings in Q4... so marketing budgets must be in play? - Will Amazon pass eBay in December (after a record month)?

Pageviews per Visit

This is the most interesting analysis: Craigslist users view over 50 pages per session, eBay users ~25 and Amazon users ~12. A couple reasons why:

- First, listing on Craigslist has become increasingly more cumbersome. To list a single item can take over seven steps. The same can be said for eBay. - Second, the finding experience on Craigslist and eBay is predicated on hunting for values... back and forth through search results. - Meanwhile, Amazon is the king of targeted search results and streamlined purchasing

... which leads to me to conclude that this data is more of an example of efficiency than of stickiness. Amazon is more than twice as efficient as eBay and four times as efficient as Craigslist.

That same trend is evident in minutes spent on these sites per month. The trends are nearly identical and again speak to the efficiency of the sites:

I Lost My Comments Installing the New Disqus & Facebook Connect

Some good news:You can now comment on this blog using Facebook Connect and Seesmic. I upgraded versions of Disqus to enable it (very slick).

Some bad news: While installing the new Disqus version, I encountered some issues and lost all of my existing comments. Yup. I was struggling to upgrade Disqus versions because it kept reverting to the "legacy version"... so I exported my comments in the XML file and then uninstalled Disqus. I assumed that, since there is a function to export via XML, there would be the ability to import via XML.

I haven't yet figured out how to import my existing comments - in fact, I am worried that it's not possible (I've dug through the Disqus interface a fair amount... even posted to the forums).

Anyone have advice on how to solve this?! Of course, you can leave it below using Facebook Connect!

2009 Predictions: iPhone Gaming Will Replace Nintendo and Sony

My 20 Digital Media Predictions for 2009 series continues with a story (The Dream iPhone) that tangentially sits atop Techmeme at the moment. Most of the talk about the below iPhone v2 mock ups are about the full keyboard. My initial take was around the Nintendo-Gameboy-like controller: A/B buttons and control pad:

While I do not think that mocked up 'joystick-lite' is the solution, it brings me to one of my 2009 Predictions:

iPhone Gaming Will Progress Beyond Novelty

I've written before about the iPhone's rapid destruction of handheld gaming systems (sorry Sony PSP, Nintendo DS, and others). Portable gaming systems are struggling as the iPhone (and others) offer full gaming consoles within a phone, messaging system and internet device. How can the PSP and DS compete?

Right now, they are only competing on game quality, which comes in two forms:

1. Production quality (titles, graphics, etc) 2. Control quality (the DS for instance offers a more engaging, hands-on experience)

Currently, the iPhone is taking market share because its price point and ease of use. It has yet to truly compete on game quality because, like it or not, the games are all novelties. The games have solid graphics (not amazing - but consumers don't expect a portable PS3) - but the game-play is generally weak: tilt the phone and move jerkily right, left, forward, backward. This is fun for a little - but doesn't offer longterm game-play. In the current format, will a Mario Brothers or Madden Football exist? Simply put: no.

But in 2009, game-play will be solved and we will be willing to fork over $10.00 - $25.00 for big titles that offer extended play.

Someone will figure out how to add a control pad atop the screen. Someone will figure out how to layer that with the accelerometer. Someone will figure out how to make successful titles like Madden Football, Metroid, Mario, Little Big Planet, etc iPhone compatible. The Gameboy solved it for years and iPhone developers will do it in 2009... beating Nintendo and Sony in the process.

beRecruited Featured in Guam's Pacific Daily News

A few days after beRecruited's feature in the Wall Street Journal is the below mention from Guam's Pacific Daily News. The article profiles a local softball player - MeiLani Quintanilla - who received a scholarship to play at Calumet in Indiana. Quintanilla was found via beRecruited:

"I was really shocked," Quintanilla said. "I didn't think that I would get a chance to play at all. I had to recheck my e-mail to see if it was really my account. It was surreal."

Crimson Wave softball coach Tom Fickett sent the e-mail. After Quintanilla replied, Fickett called her and offered a year-to-year scholarship later that month. She said she has partial academic and athletic scholarships to attend Calumet, which participates in the NAIA. She said she will serve as a utility player.

...

The opportunity presented itself after a motherly intervention. Lillian Quintanilla, MeiLani's mother, posted a profile of her daughter on a Web site called beRecruited. The site states that it can be used as a tool to connect high school students with college coaches.

MeiLani Quintanilla's mother was also her softball coach in her senior year at George Washington High School. Lillian Quintanilla knew that if she wanted her daughter to play college softball, she would have to do something different because coaches in the U.S. mainland rarely come to Guam to scout athletes.

She said that she did her research online and found the beRecruited site. She then posted a profile of her daughter, and Fickett read it.

"It was good information," Fickett said via telephone from Whiting. "I really liked the grades academically as strongly as athletics. I saw that she was award winning."

2009 Predictions: More Huffington Posts and Daily Beasts

First there was the Drudge Report.Now there is the Huffington Post. ... And Politico. ... And The Daily Beast.

And as part of my 20 Digital Media Predictions for 2009 series, I am suggesting that there will be others that successfully break into this space.

Why? Because five themes are at work here:

1. For the most part, the major news sources aren't yet hip to online traffic and marketing... that leaves a major opportunity for upstart, web savvy online content players who aggregate and create news.

2. It is (relatively) easy to drive traffic in these formats... and it is scalable. With the right team, it is possible to achieve large numbers quickly.

3. Consumers like their content aggregated and they like it delivered in blog-like formats (real-time, easily digestible, full of links).

4. Launching is affordable as it requires little up-front costs (development, dollars, etc). Meanwhile, data is easily accessible such that the business model and audience appetite can be assessed before warranting a full investment / resourcing.

5. Verticals fetch advertising dollars. And this trend will become more apparent in 2009.

2009 Predictions: Online Video Habits Will Grow Behind Hulu

This is the first in the twenty-part series of my “2009 Digital Media Predictions”… with twenty predictions of course. Each segment is going to add color to one of the predictions from the initial list. And while I have no idea how long this project will take (hopefully it’s completed before 2010) – it certainly keeps me focused. You'll be able to follow all of the predictions here.

Prediction:Video will grow further as people’s appetite for online content moves significantly beyond 30-90 second clips

The success of internet video – and decline of traditional television - has been credited with the dwindling attention span of viewers. The sweet spot for a YouTube clip, for instance, is less than 150 seconds.

And while many argue that this is because we have become less engaged, attentive consumers, I’ll take a different approach: It’s too damn hard for the layman to create good content that lasts over 150 seconds. It either is too difficult to produce or too difficult to remain interesting. Likely both.

But Hulu’s success has proven that we are willing to sit in front of our computers for entire programs. And as CBS Interactive, Fox, YouTube HD and others continue to produce high quality content - our viewing habits will mature. More content is moving online… and more importantly, more high-quality is moving online. As our bandwidth and screens support it – so too will our taste and willingness to watch it. And as these trends change, it will pave the way for computers and online content in the living room.