Netflix CEO Reed Hastings predicted back in October that Amazon would enter the DVD rental market, and it turns out he was right…sort of. Amazon said today that it’s launching a service in the UK, with pricing 30 percent lower than competitors. Ironically, Netflix will not be one of those competitors because the Los Gatos company delayed its U.K. launch for a year so it could gird itself for Amazon’s U.S. launch. So what does this mean for Netflix? According to CBSMarketwatch.com, it’s not necessarily all bad. Analyst Daniel Ernst of independent research firm Hudson Square Research said Amazon’s monthly price in the U.K. is higher than Netflix’s $17.99 subscription.
Assuming six DVDs shipped per month, the maximum allowed by the Amazon U.K. service — Netflix has no limit — net revenue to Amazon would be $16 per month versus $15.77 for Netflix, Ernst calculated. What that means, according to Ernst’s analysis, is that Amazon is “not likely to enter the U.S. market with a price war in mind — a significant risk posited by the market for Netflix.”
We’re guessing that not everyone agrees with that assessment.