Amazon Takes Video Streaming Service Global in Challenge to Netflix

Jeff Bezos Amazon - H - 2016

The e-commerce giant, led by Jeff Bezos, has now expanded its Amazon Prime Video service to more than 200 countries and territories.

Amazon has rolled out its streaming video service worldwide to more than 200 countries in a challenge to Netflix. 

Prime Video is now available bundled with Amazon Prime in countries where the two-day-shipping subscription is offered, including Belgium, Canada, France, India, Italy and Spain. In countries that do no have Amazon Prime, subscribers can sign for a standalone Prime Video service, which costs  $2.99 (or 2.99 euro) for the first six months and $5.99 (or $5.99 euro) thereafter. Netflix's popular mid-tier plan currently costs $9.99 a month. 

The announcement of the global rollout of Prime Video came on the day that Amazon was planning a launch in India. The service remains unavailable in China. 

The e-commerce giant, led by chairman and CEO Jeff Bezos, previously offered its Amazon Prime Video service in the U.S., U.K., Japan, Germany and Austria. 

"We are excited to announce that starting today, fans around the world have access to Prime Video,” said Tim Leslie, vp international for Prime Video on announcing the news on Wednesday.

Talk of a possible global video service rollout first started late this year when Amazon said its original series, The Grand Tour, hosted by Jeremy Clarkson and his former Top Gear on-air colleagues James May and Richard Hammond, would be available on Amazon in more than 200 countries.

The company didn't immediately explain if the show would simply serve as an early experiment for rolling out its video service globally or if a global launch was imminent. Asked about a possible global launch, a representative at the time reiterated that The Grand Tour would stream in more than 200 countries, but added: "We don't have anything else to announce."

Analysts have been skeptical that Amazon would be able to renegotiate their licensing deals for global rights to all of the shows they currently offer in the United States. And it does appear that it will have a smaller library that Amazon plans to grow over time. 

Amazon says that global Prime Video members will be able to stream original series The Grand Tour, Transparent, Mozart in the Jungle and The Man in the High Castle. Most original kids series are also available. More originals, including Goliath staring Billy Bob Thornton and the upcoming Bryan Cranston-produced Sneaky Pete, will be added next year. Prime Video will also offer a library of licensed movies and TV shows. 

Jefferies analyst Brian Fitzgerald recently highlighted that Amazon's most recent quarterly earnings report was "mixed" with "soft margins" and margin guidance that "disappointed." He continued: "Now we know where a major piece of incremental investment might be going to — digital content for Amazon Video."

How much incremental spending would a worldwide video service rollout require? "We believe that the launch of a global video streaming service would require an additional $1 billion-$2 billion video content spend in 2017," the analyst recently estimated. "That would bring Amazon's annual content expenditure in line with Netflix, which disclosed an about $6 billion content budget" for 2017.

On the company's third-quarter earnings call, CFO Brian Olsavsky had said that "video content and marketing associated with that" was nearly doubling year-over-year in the second half of 2016.

What does the Amazon move mean for Netflix? "It appears as though Amazon will look to compete on price and locally created content," Jefferies analyst John Janedis wrote in a report published after news of the worldwide availability of The Grand Tour, maintaining his "underperform" stock rating. "Our thesis that increased competition will slow Netflix's global subscriber growth is unchanged."

He added: "Netflix's price point in many non-U.S. markets may be aggressive given the price point of some local offerings, customs to not pay or pay only a modest amount for content, and the cheap cost of the bundle. Amazon's price point appears to be well below Netflix ($15 versus $90-plus per year in India, and includes a subscription to Prime."

India will be one key battleground between the global video streaming giants as Amazon has recently struck content licensing deals with such local players as Dharma Productions and T-Series, among others. "Amazon has been aggressively securing digital rights for content in India, much more so than Netflix," said Janedis. "This could ultimately lead to Netflix increasing investment in local content, impacting the margin ramp."

Amazon announced Wednesday that Prime Video in India will have exclusive rights to Bollywood and other regional movies in additional to Hollywood fare. Amazon also said it had begun production on multiple originals for India. 

Janedis in a recent report noted that India could be a sign of the company's overall content strategy in international markets. "Amazon has been developing relationships with local talent and has started making investments in high-quality content," Janedis said. "While the investment as of now is somewhat modest, local expectations are that it will ramp. We have already expected the need for Netflix to move more aggressively into locally curated content ... This could also impact our marketing cost assumptions for Netflix going forward."