It is particularly interesting that Netflix has such low churn rates when compared to Amazon Prime, considering the latter gives you a much broader Bundle Deal (by subscribing to Prime you get access to Prime Video, Prime Music, and free 2 day delivery on items purchased on Amazon). It’s likely that the fact that Amazon Prime only works on PCs/Tablets and by using the FireTV or FireStick, while Netflix is compatible with multiple devices and the fact that it actually comes pre-installed in many smart tv’s and game consoles, contributes to Netflix’s current supremacy.
It would be interesting to analyze the effects of Amazon’s new Streaming Partners Program (http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-newsArticle&ID=2121003) in Netflix’s market dominance. Since last week (December 8th, 2015) Amazon Prime subscribers are able to use single account to access not only Amazon Instant Video but also libraries from other services like Showtime and Starz, among dozens more. This “video library consolidation” will make Amazon Prime significantly more convenient and might change the competitive landscape.
You are on point when explaining the core of Amazon’s success: Being able to offer everything while only stocking popular items, and reinvesting is profits to further develop it’s business. I believe your post opens the door to discussing one particularly interesting topic regarding how Amazon operates: the implication of Amazon not being a profit making business, which is it has never distributed dividends among it’s stockholders.
The natural question is how long can a zero-profit model last, because the decision of investors to buy and hold stock has to be supported on the rationale of earning dividends eventually. The conclusion seems to be paradoxical: Amazon will have no incentive to end its actual scheme as long as Wallstreet keeps trusting the company (which has been going on for almost 20 years, since the company’s first IPO in 1997). In the meantime, the current trend were Amazon’s revenue increases and it’s net profit (%) decreases is likely to continue. By doing so it will keep discouraging competition (a company that’s trying to turn a profit simply can’t compete on price with one that isn’t) while still having tremendous levels of cashflow to play with.
For further reading on this issue, visit the following link: http://www.slate.com/articles/business/moneybox/2014/01/amazon_earnings_how_jeff_bezos_gets_investors_to_believe_in_him.1.html