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When Amazon (NASDAQ: AMZN) started letting Prime members download its Instant Videos to play later, Netflix (NASDAQ: NFLX) didn't want any part of it. A year later, it's done a complete 180 and is now allowing subscribers to download select series and movies to their iOS and Android devices. Netflix Chief Content Officer Ted Sarandos hinted at the possibility last month, but his comments indicated video downloads would come to emerging markets (where internet connections are less reliable) first. It turns out it's available to everyone.
I suppose "Stranger Things" have happened. It wouldn't be the first time Netflix "Flaked" and went back on its plans. But why was management so hesitant to allow subscribers to "Get Down(loading)" in the first place? (OK, that last one doesn't really work.)
There's no paradox of choice
Last year, Netflix product head Neil Hunt said downloading "adds considerable complexity to your life" as a subscriber. He noted that adding another viewing option could result in a paradox of choice for consumers, whereby a growing number of options prevents them from choosing any of them.
That reasoning is rather silly considering there are clear instances when subscribers would choose to download -- i.e., when it's their only viewing option. That applies equally to subscribers in places like India, where internet connectivity is spotty and wireless connections are slow, and in the United States, where we throw a fit when we can't watch Netflix on the subway.
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And it's quite evidently not having a negative impact on Amazon Prime Instant Video viewers. In Sandvine's semi-annual report in June, it found Amazon video accounted for 4.3% of fixed broadband traffic. That's small potatoes compared to Netflix's 35.2%, but it makes Amazon the third-ranked downstream application. Just a year ago, Amazon was ranked eighth.
In fact, Amazon's success in both attracting customers to Prime and getting them to start streaming video may have prompted Netflix to allow its users to download content. Most Prime subscribers are also subscribed to Netflix, and Netflix doesn't want its customers getting hooked on a competitor's show during some three-hour flight. The move isn't so much designed to attract new subscribers as it is to retain its existing subscriber base (at least in developed markets like the United States).
Staying ahead in developing markets
Being able to download content is a key feature in developing markets where internet connections are less reliable. That's why it made sense when Sarandos indicated Netflix would launch the download feature in emerging markets first.
But now it appears Netflix will have another global video streaming competitor to deal with as Amazon is reportedlyplanning to launch Prime Instant Video worldwide this month. Netflix can't afford to let Amazon leapfrog its international growth.
Netflix's international segment is now driving its subscriber growth. It saw 4.72 million of its 5.25 million total net subscriber additions over the last two quarters come from its international segment. It expects domestic growth to bounce back this quarter, but the majority of Netflix's additions moving forward will come from international markets.
As such, every market matters to Netflix, including those with poor internet connectivity that are more reliant on downloads than streaming. With high expectations from investors for it to turn its billions of content and technology spending into profits, it can't afford to not offer the same (or more) technical features as its competition. So, now everyone can download Netflix content.
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