Survey Of Prime Users Shows 'Small But Significant' Portion Who Don't Subscribe To Netflix

A substantial percentage of U.S. Prime users are using Amazon Prime Video, while a large number of them are also Netflix subscribers, Bernstein’s Carlos Kirjner said in a report. He added that in case a significant number of households were to choose an SVoD provider other than Amazon.com, Inc. (NASDAQ: AMZN), Netflix, Inc. (NASDAQ: NFLX) would miss the expectations for domestic subscribers.

Amazon Prime has become a “large, growing and valuable” program for the company. The program is estimated to have 44 million subscribers in the US and about 7 million in the UK. “We also estimated roughly the value of a Prime user, or more precisely the value of a Prime conversion, at $116/year of incremental operating profit,” Kirjner wrote.

About 80 percent of US Prime users were using Amazon Prime Video. Many of these users were also Netflix subscribers. “A small but significant number of households uses Prime Video and chooses not to subscribe to Netflix,” Kirjner mentioned.

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Those Not Subscribing To Netflix Could Increase

With Prime’s increasing penetration and Amazon Prime Video continuing to improve its content offer, the number of households opting for Amazon as their SVoD provider but choosing to not subscribe to Netflix would rise, or at best remain around 7 million.

“It is quite plausible, we think, that when we add up Amazon Prime Video, Hulu, and one of the many SVoD offers that will undoubtedly emerge, perhaps by YouTube, Apple, Comcast, and possibly many media companies and networks (e.g., HBO Now), we could see ~10 million or so SVoD homes have their needs met by one or more of these alternatives and as a consequence choose not subscribe to Netflix,” the analyst stated.

In case a significant number of households were to choose an SVoD provider other than Amazon, it would become very tough for Netflix to meet the consensus estimates of domestic subscribers, at 65-70 million.

Bernstein has an Outperform rating and a price target of $1,000 for Amazon, while maintaining an Underperform rating and a price target of $62 for Netflix.