Amazon little threat to Netflix, Crave for now: analyst

A tepid launch of Amazon.com Inc.’s Prime video streaming service in Canada doesn’t seem likely to pose a challenge to existing players in the Canadian streaming market — for the time being, at least, given Amazon’s global clout could make it a formidable challenger in the future. Amazon’s quiet roll out of the service last month, combined with a small library of content, makes Troy Crandall, an equity specialist at Raymond James Ltd., skeptical that the launch of the streaming service has led to a lot of new subscribers for Amazon Prime in the three weeks it’s been available in Canada. “They haven’t really ramped up the marketing. I bet many Canadians don’t know that Amazon offers video with its Prime service yet,” he said in a phone interview. “It seems they quietly rolled it out." Crandall noted that such soft launches are common practice for companies. He added: “I don’t think Prime ranks anywhere substantial right now” in terms of over-the-top (OTT) viewing in Canada thus far. The company isn’t disclosing how many subscribers it’s picked up in Canada since its expansion here on Dec. 14. In response to questions about how many Canadians have tried the service, as well how the company sees Amazon Prime’s role in the country’s streaming market, Amazon spokesman Kaan Yalkin said in an email there’s “nothing to announce at the moment.” Additionally, Amazon Prime’s Canadian catalogue is much smaller than offerings from Netflix Inc. and BCE Inc.’s CraveTV. For instance, it currently has about a dozen TV shows, a small fraction of that available though Crave or Netflix. Tech and culture reporter Peter Nowak wrote in his review of the service in December that “the pickings are really, really slim,” and noted that Amazon doesn’t offer nearly as many options and apps for viewing as its competitors. It doesn’t appear to have inspired much interest among industry watchers either, with those contacted by The Wire Report generally reporting they hadn’t tried the service. Should Amazon put some advertising muscle behind Prime and beef up its catalogue, the company does have the potential to be more disruptive to the market than Shomi was, Crandall said. Shomi, a joint venture of Rogers Communications Inc. and Shaw Communications Inc., shut down weeks before Amazon entered the market. “Not with what they’ve come up with so far, but I think it’s definitely a start. Amazon is very aggressive, and they have a lot of capital. So you don’t bet against Amazon,” he said. “We’ve seen how aggressive they’ve been in creating their own content to go head to head with Netflix.” He added Amazon is likely “to get stronger in the Canadian market over time. And I think they’ll act similar to how they’re acting in the U.S., and they’re going to try to take Netflix on.” Crandall added that means Amazon, Crave and Netflix could end up becoming the three big competitors in the Canadian market, or another service — for example, the U.S. Hulu or a brand-new service — could come into Canada. Should Amazon put more effort into Prime, it could make Canada’s largest telecom and media company the little guy in the Canadian streaming market. “Bell has a lot of access to capital, but it’s nowhere close to the size of the other two competitors and how big their pocketbooks could be, and the fact that they have global leverage, which allows, just like in anything, volume discounts,” he said. “When they’re going after licensing deals, if Bell goes in and says we’ll pay this for a licensing deal for a potential population of 30 million, Netflix is walking in and saying a potential population of a billion. Obviously on a per-subscriber basis, they can get the content cheaper.” Independent broadcasting consultant and lawyer Peter Miller also pointed to the advantage global players have when it comes to the streaming market. “It’s no surprise that between Shomi and Amazon, an Amazon has a better business model. Why? Because first of all, their business model is global. Second of all, it leverages another business, the whole delivery, so they’ve got synergies,” he said. “In Canada, the synergies that Canada could have had with the operations of Shaw and Rogers were to some extent circumscribed, and the best example of that is net neutrality. So there was nothing Rogers and Shaw could do to favour Shomi. They couldn’t provide it over the Internet free of bandwidth caps.” Miller added that while the shutting down of Shomi and the entrance of Amazon were separate decisions, “there’s no doubt that the exit of Shomi made it easier for Amazon Prime to come in, because many of the rights that Shomi had were Amazon programming that reverted back.” Like Amazon Prime, both Crave and Shomi were originally designed as customer retention tools, and were packaged with Bell’s, Rogers’ and Shaw’s telecom services, until CRTC changes to regulations prompted the companies to offer the services on a stand-alone basis. Miller said that Amazon choosing to bundle the streaming service as part of its Amazon Prime delivery service in Canada, instead of a stand-alone product, “suggests that they’re continuing in their strategy of using it primarily as a retention tool and a customer value tool supporting the main Amazon business.” He added: “To that extent, people are not going to buy Amazon Prime video for Amazon Prime video. They’re buying Amazon Prime, and they get .” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Charelle Evelyn at cevelyn@thewirereport.ca CORRECTION: A previous version of this story referred to Troy Crandall as an analyst at 3Macs.

Amazon little threat to Netflix, Crave for now: analyst

Broadcast | January 5, 2017

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