Why Amazon Should Acquire Netflix

As part of my 2009 Digital Media Predictions series, I said that Amazon should acquire or merge with eBay and/or Netflix. Both perspectives are coming… but first, Netflix:

Movie ticket sales are down. DVD and Blu Ray sales are down.

It’s indicative of the changing form of entertainment consumption (torrents, youtube, etc) and of the recession (why buy a $30 movie? Will you ever get $30 of value from it?). And it’s more than just movies – it’s music, newspapers and any other form of entertainment or consumption where the audience must ask, “is this worth paying for when there are so many other alternatives”?

And that’s where Netflix makes total sense to Amazon.

First, if you are going to buy a movie, you have two options: Amazon and iTunes. No other store should be visited because the pricing is unbeatable and search experience is perfectly simple.

But what happens if you no longer have an appetite for buying movies? Or if those movies – even at Amazon’s unbeatable price point – are just too expensive to justify one or two viewings (a question brought into focus thanks to the economy)?

What happens is that you find other alternatives - free and cheaper alternatives.

For those seeking free alternatives, there are countless torrent sites, hulu, and so forth. Not Amazon’s space (nor should it be). For those seeking cheaper alternatives, there is Netflix: unlimited movie rentals for less than the price of a single DVD. For around $15 a month, Anette and I receive 8-16 Blu Ray movies each month from Netflix (depending on what we are watching).

So why does Amazon + Netflix make sense? A few reasons:

1. In economic hardship or not, Netflix offers an alternative to movie purchasing… which I believe, over time, is eroding (just like music). Offering consumers the ability to either purchase a movie at a flat rate (ie $14.99) or renting it within a monthly subscription (ie $14.99) provides choice while still keeping buyers on Amazon.

2. I love Netflix’s service… but I despise Netflix.com and the site experience which, as I’ve written before, hasn’t changed for years. Amazon would immediately fix this by leveraging their best-in-class search and site experience – and integrating that into the core Amazon platform.

3. Amazon is the king of cross merchandising (except here!). With Netflix, Amazon would be able to bundle all sorts of other products, services and goodies that Netflix simply cannot. Renting National Lampoon’s Vacation? Why not buy the entire bundle for $24.99. Or why not keep the DVD for a reduced cost?

4. Amazon is also the king of inventory control and harnessing consumer demand / interest – and that plays into both sides with Netflix. Amazon is able to determine what inventory on Netflix’s or their side should, based on shifting user demand, be moved into sales or rentals. For instance, in six months, the gazillion copies of IronMan that Netflix had stocked are going to be far less valuable than they were at movie release… those copies are more valuable on Amazon than anywhere else (except perhaps eBay). Amazon could create their own media marketplace and sell the used goods after having already made money on those units via the subscription service.

5. Amazon’s Unbox service is cooler than it is successful. Netflix has their own streaming product service / box as well. Neither has made a big dent into Apple’s iTunes, Mac Mini and Apple TV market… but combined, they have greater leverage and flexibility. Perhaps Netflix + Unbox reaches the tipping point that Amazon has been missing. I would be willing to bet that an Amazon “On Demand” product hooked into my TV would be terrific and worth the money. Also creates a new avenue for Amazon to package its digital music offering.

6. A few other random thoughts / possibilities: - Both Netflix and Amazon are masters of shipping… might their be efficiencies or negotiating leverage in pricing? - Both companies spend a great deal on online marketing for media products… there are certainly efficiencies to be gained as a combined entity - Finally, does the combination of Amazon + Netflix allow for movement into new areas like Video Game rentals?

2008 Music Mashed Up by DJ Earworm

All of 2008's pop music mashed up into one four minute video. Not only is the music compilation done well - the video mashing and new YouTube HD look terrific. DJ Earworm - United State of Pop 2008 (Viva La Pop)

Hulu's Lazy Sunday: Family Guy & Saturday Night Live Clips?

I love Hulu. Hulu understands the web, delivers great quality, the experience is simple, and understands both search and portability.... better than any other video site on the web.

When YouTube hit it big, much credit was given to Saturday Night Live's Lazy Sunday video - and appropriately so. Hulu hasn't had a Lazy Sunday equivalent - in part because hit videos are now distributed across numerous sources and players. But Hulu did see big growth thanks to the election and the subsequent Sarah Palin hit videos (thank you Tina Fey).

While Hulu can't point to a single video, it can look to Family Guy, American Dad and Saturday Night Live. Hulu sorts videoes by time (all time, week, day, etc) and type (episodes and clips).

For episodes, Fox cartoons account for nearly 100% of the most popular videos:

Today's most watched: 8/8 episodes are Family Guy This week's most watched: 7/8 episodes are Family Guy This month's most watched: 5/8 episodes are Family Guy, 1/8 is The Simpsons All time most watched: 8/8 Family Guy

For clips (usually four minutes and less), Saturday Night Live represents the majority: Today's most watched: 4/8 are SNL This week's most watched: 6/8 clips are SNL This month's most watched: 7/8 are SNL All time most watched: 7/8 are SNL

I understand why SNL dominates Hulu Clips - great content intended to be digested in "clip" format. But I am surprised that Hulu episodes are dominated by a single source... after all, Hulu has great diversity. I have never watched an episode of American Dad or Family Guy on Hulu, but I have watched Arrested Development and The Office... and I would expect that similar shows appeal to larger demographics. This suggests one (or all) of the following:

- As consumers move from viewing clips to full episodes, shows like Family Guy are best suited for that shift (less plot, more one-liners) - Hulu's core user base is younger (according to Quantcast, 50% of viewers are under 34) - Cartoons are simply more viral

Regardless, I hope that Hulu continues to onboard all types of content... after all, I believe Hulu is a key to bringing the internet to the television.

2009 Predictions: iPhone Gaming Will Replace Nintendo and Sony

My 20 Digital Media Predictions for 2009 series continues with a story (The Dream iPhone) that tangentially sits atop Techmeme at the moment. Most of the talk about the below iPhone v2 mock ups are about the full keyboard. My initial take was around the Nintendo-Gameboy-like controller: A/B buttons and control pad:

While I do not think that mocked up 'joystick-lite' is the solution, it brings me to one of my 2009 Predictions:

iPhone Gaming Will Progress Beyond Novelty

I've written before about the iPhone's rapid destruction of handheld gaming systems (sorry Sony PSP, Nintendo DS, and others). Portable gaming systems are struggling as the iPhone (and others) offer full gaming consoles within a phone, messaging system and internet device. How can the PSP and DS compete?

Right now, they are only competing on game quality, which comes in two forms:

1. Production quality (titles, graphics, etc) 2. Control quality (the DS for instance offers a more engaging, hands-on experience)

Currently, the iPhone is taking market share because its price point and ease of use. It has yet to truly compete on game quality because, like it or not, the games are all novelties. The games have solid graphics (not amazing - but consumers don't expect a portable PS3) - but the game-play is generally weak: tilt the phone and move jerkily right, left, forward, backward. This is fun for a little - but doesn't offer longterm game-play. In the current format, will a Mario Brothers or Madden Football exist? Simply put: no.

But in 2009, game-play will be solved and we will be willing to fork over $10.00 - $25.00 for big titles that offer extended play.

Someone will figure out how to add a control pad atop the screen. Someone will figure out how to layer that with the accelerometer. Someone will figure out how to make successful titles like Madden Football, Metroid, Mario, Little Big Planet, etc iPhone compatible. The Gameboy solved it for years and iPhone developers will do it in 2009... beating Nintendo and Sony in the process.

Is It Surprising that P&G, Tide Struggle with Facebook Advertising?

In today's New York Times, Randall Stross dissects the world of brand advertising within social networks. Stross' article, Advertisers Face Hurdles on Social Networking Sites, delves into whether or not brands can scalably succeed on social networks (namely Facebook):

Brand advertisers on Facebook can try one of two new approaches. They can be more intrusive, but the outcome will not be positive. Or they can create genuinely entertaining commercials, but spend ungodly sums to do so.

When Facebook convinces advertisers to stage Super Bowl-sized entertainment every day, its future will be assured.

These are important questions, but they aren't necessarily the right ones. Rather, I'd ask:

- For what brands and verticals *does* advertising within social networks work? For instance, we know it works within music.

- At what cost does the advertising come? Is it measurable?

- What tactics are successful advertisers using? Are there 'black hat' behaviors and, if so, does that prevent certain brands / verticals from succeeding?

These questions are important because, despite Stross' well-written and researched article... it really shouldn't come as a surprise that P&G's Tide campaign doesn't work on Facebook. Do social networkers really want socialize around detergent? Even if they do - is that valuable for P&G?

Tide's failure on Facebook seems obvious. But I do not believe it suggests that brands cannot succeed on Facebook.... it may well be however that only brands within certain verticals can succeed until one of two things happen:

1. Facebook becomes more aggressive on the ad front (and it will) 2. The Tides of the world mask their ads behind more creative, sneaky efforts

The “America’s Favorite Stains” campaign, offered on Facebook by Procter & Gamble, asks for members’ ideas. It recently displayed 18 submissions.

Apple, iPod Touch Shake Up Yahoo Games Homepage

A few months ago, Nintendo and YouTube literally shook up the digital ad world with their Experiece the Wii ad/video. It's awesome. 4,500,000 video views aren't too shabby either. Today, Apple did something similar by running their iPod Touch ad on Yahoo Games front-door. It's the same ad that has been running on television for quite some time... but it behaves much like the Wii video: changing the rest of Yahoo's page as the iPod shifts, tilts, and so forth.

I love these ads - far more entertaining and interactive than traditional banner units. Again - the Wii video was viewed 4.5 million times and was discussed, shared and analyzed on countless blogs / sources.

The real questions are: - how difficult is it to produce these sorts of units and integrate them into the publisher's site? - consequently, how scalable does this become? - and what sorts of CPM lifts do they provide. If Yahoo typically fetches $5 CPMs for that size unit, is this $10? $20? $50?

More at MacRumors - including the video

Nintendo Wii and Wii Fit Dominate eBay Shopping

TechCrunch posted this morning about the top tech gadgets as measured by eBay's top sales (always a good indication of macro-level trending and habits... one reason why I enjoyed working at eBay so much). Michael Arrington focuses mostly on the remaining popularity of the Nintendo Wii - which is stunning considering how its their second consecutive holiday season and so few games have been released.

Here are my thoughts:

- 83% of the top 15 items are video games. I've said it before: video games are a massive business

- 12% is mobile and the Blackberry Curve + Blackberry Pearl are bigger than the iPod 3G (clearly the price point and used market)

- Only two tech items are non-mobile / non-gaming: the iPod Touch (really surprised) and the MacBook Air

- The Wii Fit is amazing. More Wii Fits were sold than Playstation 3s and Guitar Hero IIIs combined.

- The drop off from the Nintendo Wii and Xbox360 is huge. The Wii sold 2mm+ items, the Xbox 1.3m and then next biggest item was 350k. Furthermore, the 15th item only sold 1,650 units

The Top 15 Tech Purchases Nintendo Wii: 2,056,866 related items sold Microsoft Xbox360: 1,297,903 related items sold Sony PSP: 350,591 related items sold iPod Touch: 281,361 related items sold Nintendo Wii Fit: 266,584 related items sold Apple iPhone 3G: 212,837 related items sold BlackBerry Pearl: 207,688 related items sold BlackBerry Curve: 193,788 related items sold Sony Playstation 3: 103,333 related items sold Guitar Hero III: 98,159 related items sold Halo 3: 91,067 related items sold Grand Theft Auto IV: 43,005 related items sold MacBook Air: 12,423 related items sold Guitar Hero Aerosmith: 3,749 related items sold Rock Band 2’s: 1,650 related items sold

Andy Azula, I Actually Like Your Latest Whiteboard Commercial

I've always been surprised by how much traffic my "Andy Azula - The Artist in the UPS ‘Whiteboard’ Commercials" blog post continues to drive. It's quite apparent that Andy Azula and his UPS commercials are quite polarizing. The commercials are now a year old and, for the most part, I find them remarkably annoying.

But like my surprising switch on ESPN.com's new Beta, I suppose I am able and allowed to switch my opinion of Andy Azula... I really like the latest commercial (embedded below). I am not sure how they do it, but the mixture of drawing to animation is seamless and really captures the point that UPS is trying to convey.

By the way - I also love the UPS video player. Very creative and well themed.

ESPN Beta - The Review (Beta)

I have blogged regularly about how much I like ESPN and their internet business. In fact, I've gone so far as to say it's difficult-to-impossible to complete with ESPN on content alone. And I've gone so far as to pay for their Premium Insider service. As an ESPN Insider, I got access to the new ESPN Beta (in other words, the new ESPN website revamp that has apparently been much of their focus for the last several months). And because I have spoken glowingly about ESPN and ESPN.com previously - I don't feel bad being sour about ESPN Beta.... but I am and here's why:

- It's too much like a magazine and too little like a sports site

- The magazine layout makes it more appropriate for People / US Weekly-like content than sports

- The screen shot below demonstrates just that - the only true sports content is in small blue text on the upper right... and that's what I want to see!

- The grid layout below the main module is visually attractive - but it's used exclusively to promote ESPN personalities rather than content

- The new header is clearly designed to increase pageviews and make hubs out of each league / sport (the navigational drop downs were removed)

- There are five headers / navigation bars: leagues, scores, ESPN properties, ESPN.com themes, sports... HUH?!

- While I like the ESPN Red color scheme, it makes the blue, gray and brown text very difficult to read

I've turned the Beta off as I am more than underwhelmed... I am struggling to use the new site.