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Straight Talk Consumer and Entertainment Services

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Few companies are the subject of as many client queries at Omdia as Amazon. Most are rightly concerned about the online retailer’s impact on their particular industry, but key to understanding its impact is how the growing number of components of its Prime bundle, Fire device range, and Alexa digital assistant platform combine to win and keep subscribers.

Data from Omdia’s latest consumer survey shows how far Amazon has come:

  • No. 2 in subscription TV video by a wide margin: Nearly half of adult US respondents (47%) subscribe to Amazon Prime; still some way behind Netflix (60%), but way ahead of Hulu (29%), Comcast (17%), and other services from established media players.

  • Bigger than Sony in devices: As shown in Figure 1, over 37% of US respondents had at least one Amazon device, which is less than for Samsung (53%) and Apple (52%), but more than for Sony (30%) and other major brands.

  • The clear leader in the smart home: Two-thirds of respondents (67%) with smart speakers had at least one Amazon Echo, compared with 29% for Google Home and just 4% for the Apple HomePod.

Figure 1: Amazon devices are more prevalent in US homes than those from many established brands

Amazon’s progress is due to a combination of strategies that cut across the growing number of segments the retailer is active in:

  • Saving customers more than just money. At up to $119 per year, Prime’s bundle of free fast shipping, video on-demand, music streaming, and other perks is excellent value, but price alone doesn’t explain its success. Key is the convenience of free fast shipping, cited as Prime’s number one benefit by 84% of subscribers in a previous Omdia survey. Crucially, this feature saves not just money, but also drudgery (e.g., topping up household essentials), relationships (e.g., the just-remembered birthday present) and more recently, anxiety (e.g., home shopping in the COVID-19 age).

  • Creating opportunities to subscribe—and stay subscribed. The likes of Netflix and Spotify have to work hard to acquire subscribers, by investing heavily in marketing or partnering with operators in order to catch consumers at those rare times when they’re looking to change their pay-TV, broadband, or mobile tariffs or suppliers. In contrast, millions of consumers spend on Amazon several times a year, making Prime an easy sell to non-subscribers, and for subscribers, a gift that keeps on giving.

  • Delivering what’s really missing from modern TV. Nearly as many Prime subscribers cited video (77%) as an important feature as shipping in the previous survey—and Amazon’s decision to bundle a Netflix-like service in the package has certainly been disruptive. But more importantly, Amazon is getting closer to delivering what many viewers ultimately want from TV—a quick and easy way to find things to watch—by uniting as many video services within its Prime Video app and Fire TV platform, both its own and from third parties, such as Showtime and Starz.

  • Being OK with second-place—as long as Prime’s in every place. Each component of Prime doesn’t need to be better than Netflix, Spotify, or Disney+; it just needs to be “good enough” to keep as many people as possible subscribing to Prime alongside these pureplay competitors. For example, around one in four US Spotify subscribers say they regularly use Amazon Music, despite the fact that the retailers’ service offers little in the way of exclusive content or features.

  • Winning over homes in a post-smartphone boom world. The Fire Phone may have failed to break Apple and Google’s lock on the smartphone market, but Amazon has side-stepped the issue by focusing on communal devices over the personal. The retailer only needs only one person to subscribe to Prime or buy an Echo and Fire TV device for their whole household to effectively become an “Amazon home,” regardless of what smartphone each member has.

Chinks in Amazon’s armor are starting to show: Amid growing industry concerns about the retailer’s demands for revenue-share and ad-inventory from its partners, HBO Max and NBC Universal’s Peacock video apps recently launched without a presence on Fire TV. Fire TV’s reach will also face limits, with Omdia forecasting slowing sales of media streamers like the Fire TV USB stick and smart TVs with the Fire TV operating system (OS) accounting for only a fraction of shipments, compared to rival models with Google’s Android, Samsung’s Tizen, or Roku. But the hooks Amazon has sunk into consumers’ wider world with Prime will ensure the retailer remains a powerful and influential force in the digital services landscape.

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