Amazon Prime Instant Video The online retail giant is rebranding its

Lovefilm SVoD offering and tying it to

Amazon Prime in Germany

February 2014

FLASH INSIGHT

1

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2

Management Summary

Unlimited and ad-free streaming of movies & shows, complemented by a TVoD offering (Amazon

Instant Video Shop), a rent by mail service (Lovefilm DVD) and a DVD/ Blu-ray outlet (amazon.com) Proposition

Very low price point and tied to Amazon Prime membership which includes free next day delivery

for amazon.com goods and access to the Amazon Kindle eBook library; on the other hand, the

formerly bundled Lovefilm rent by mail DVD service is no longer a differentiator for the SVoD service

Differentiator

Besides Amazon Prime Instant Video, Amazon also offers products and services in other video

content market segment; therefore, Instant Video potentially strengthens Amazons overall video

content ecosystem and the expected Amazon media streaming box

Amazon Video

Portfolio

With its low price point and amazon.com’s strong position in the German online retail market,

Amazon could potentially quickly gain market share and effectively block other market entrants

such as Netflix

Amazon Instant

Outlook

Source: veed analytics, Mücke, Sturm & Company analysis

The rebranding and repackaging to Amazon Prime Instant Video significantly lowers the overall price point for SVoD services in the German market.

Amazon significantly lowers the price point for SVoD services in the German market some months

before the expected market entry of Netflix, creating a low-cost alternative to incumbent Maxdome,

current media darling Watchever and Sky’s recently introduced snap

Market Position

3

Amazon Prime Instant Video is a subscription-based on demand video platform, tied to the Amazon Prime membership for faster and free amazon.com delivery. Amazon Prime Instant Video: Details

Offering Details

Proposition: unlimited and ad-free streaming of movies & shows

Pricing: 49€/ year Amazon Prime membership includes access to

Prime Instant Videos; a monthly standalone subscription to Prime

Instant Video is also available for 7.99€/ month

Content: about 12,000 titles partly in HD quality consisting of

series, movies, and documentaries, also including some exclusive

Amazon Studios shows such as Alpha House

Devices: PC, Mac, Smart TVs, iPad, iPhone, Android

Smartphones

Amazon Prime membership also includes next day free delivery

service and access to Amazon Kindle eBook library

The rent by mail service for DVDs will be continued by the

Lovefilm brand in Germany

Strategic Rationale

With the rebranding and repackaging, Amazon strengthens its already existing SVoD service Lovefilm by tying it to the

attractive next day delivery service for the amazon.com retail platform

The very low price point potentially blocks a segment of the German SVoD market for other competitors

Source: veed analytics

Amazon Prime Instant Video iPad App

4

Amazon.com massively

sells DVDs/ Blu-rays

The Lovefilm brand still

operates as a rent by mail

service

Prime Instant Video offers

subscription-based, and

the Instant Video Shop

transaction-based access

to movies and shows

CE such as TV sets are

key products sold on

amazon.com

The kindle can also be

used to consume video

content

Amazon is expected to

launch an own media

streaming box in 2014

In 1998 Amazon acquired

the leading internet movie

database IMDb

With IMDb, Amazon has

access to a vast amount

of video-related data

In 2010 Amazon started

its Amazon Studios

initiative to develop and

produce movies, TV

shows and comics

Amazon Studios provides

high profile exclusive

shows such as Alpha

House for Instant Video

With Prime Instant Video and the Instant Video Shop, Amazon strategically strengthens its distribution outlets for video content. Amazon Video Portfolio

Video Content Production Video Content Distribution

Video Content Discovery Video Content Consumption

Source: Mücke, Sturm & Company analysis

? Media Box

5

Amazon positions its new SVoD service as a low-cost option, and thus significantly widens the price range for SVoD services in the German market. Market Position

pri

ce p

er

mo

nth

content catalogue size

10€

8€

6€

4€

2€

50k 40k 30k 20k 10k

expected

snap by Sky is the SVoD service with the

highest price point of 9,90€ and offers the

smallest content selection, but puts an

emphasis on its high profile HBO content

Watchever and Maxdome both follow the

same price point of 8,99€/ month, but the

incumbent service Maxdome still offers the by

far largest content catalogue (yet)

Netflix is expected to launch in Germany late

2014 in the price range of 7€ to 9€ per

month, but with an extensive content

catalogue from scratch

Lovefilm already had the lowest price point

of 6,99€/ month, but with Prime Instant Video

Amazon puts the price point even lower to

only 4,08€/ month (49€/ year)

Source: veed analytics

1

2

Before: 2,91€ range

6,99€ - 9,90€

After: 5,82€ range

4,08€ - 9,90€

1 2

6 Source: veed analytics, Mücke, Sturm & Company analysis

We are constantly analyzing industry

trends and developments in the

sector of technology, media and

telecommunications.

If you would like to discuss the

impact of Amazon Prime Instant

Video on your business, please get

in touch with:

Patrick Sturm

Managing Partner

p.sturm@muecke-sturm.de

Amazon could quickly gain market share compared to the Lovefilm offering due to the very low price point, but the sustainability of this model needs to be proven. Outlook

Drivers of Prime Instant Video

+ Amazon already negotiated a large

amount of content deals for Lovefilm,

thus enabling a quick start for Prime

Instant Video with about 12.000 on

demand titles

+ Potentially Amazon can offer

exclusive content via Prime Instant

Video such as Alpha House

+ Amazon is a very strong brand in

Germany, and next day delivery an

attractive amazon.com feature

+ Instant Video could function as the

pre-installed SVoD service on

Amazon devices such as the kindle

and the expected media box

Hurdles for Prime Instant Video

- The Lovefilm VoD service was

known for a poor browser-based

customer experience

- Compared to Lovefilm, Instant Video

loses the differentiating bundled rent

by mail DVD service

- When Netflix temporarily decoupled

rent by mail service and streaming

offering in 2012, customers

severely rebelled against this move

- With Maxdome, Watchever and snap

three strongly backed SVoD

services already are present on the

German market, with Netflix waiting

just around the corner

Amazon SVoD customer potential 2014: 1,0-1,5 Mio.

7

MSC introduced the productized market intelligence service veed in 2014, covering content and feature offerings of DTV and OTT services worldwide. Intelligence source: veed service details

video services intelligence

veed

Subscribe to veed, if you would like

to understand in detail

Which features Amazon Prime

Instant Video offers,

Which devices are being supported,

How much content the service

offers,

How this evolves within the next

months,

How this relates to the competitors

and

How this effects your business!

veed is subscription-based access to:

Continuously updated veed database,

Periodical veed insight reports and

Analyst sessions on DTV and OTT services

the veed content module:

Content categories offered (live TV, catch up and

VoD), included channels and channel quality,

Complete view on the packaging and pricing

approach

the veed feaure module:

Details on feature sets per feature category,

Set-top box specs for DTV services,

How features are supported across devices

www.veed-analytics.com