DVDs are a core Amazon product, of which it is one of the largest retailers – the challenge is to sustain this position throughout the on-going transition to digital formats.
Amazon Prime Instant Video’s first purpose is to help the transition by building Amazon’s digital video retail ecosystem. As part of the loss leader Prime bundle it also supports increased customer retail expenditure and stickiness.
Despite strong headline growth in Prime membership and some high profile content, the streaming service has yet to generate significant consumer interest. Prime’s net cost is likely to rise as Amazon must finance content to meet rising consumer expectation while suffering competitive price pressures on the bundle.