Jeff Bezos & The “Flywheel” Metaphor for Amazon Prime and Prime Video

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We get to monetize that content in a very unusual way. Because when we win a Golden Globe, it helps us sell more shoes. And it does that in a very direct way. Because when people become Prime members they buy more on Amazon than non-Prime members.

Jeff Bezos summarizes the interdependence between Amazon Prime as a whole and Prime Video, a main driver of Prime, specifically, in that Recode interview.

After having paid the yearly fee, people’s shopping behavior on Amazon changes. They start looking at more categories, they browse more, they shop more, Bezos told the audience.

Free trial convertion and renewal rates go up for people using Prime Video, Jeff Bezos said. (minute 41)

People subscribe to both Netflix and Amazon Prime (Video) and others. So there is not really a competition between Prime Video and Netflix. Amazon can charge less for Prime Video because of the way they monetize it. This is important. Compared directly on a monthly basis Prime as whole has always been cheaper than the most popular plan at Netflix.

Taking a step back, Bezos more or less explicitly laid out why the combination of the way the Prime bundle is set up (yearly fee, a lot of benefits) and the way Video fits into this, puts Amazon in a very comfortable situation going forward:

  • Because of the inclusion of video, Amazon Prime grows faster.
  • Bigger Prime means more people (Prime subscribers) using Amazon as their default shopping destination.
  • Because of the combination and cross-subsidy model video can be offered cheaper than, say, Netflix as a pure video streaming company can offer. (The result is a less expensive Prime fee than Netflix’ most popular plan.)
  • Because people don’t need to use (susbscribe to) just one streaming service, they can use Netflix (which in many ways is still superior to Prime Video) and Prime Video and others. It’s not a winner-takes-all market.
  • The result is an Amazon Prime that looks like a no-brainer to an ever rising portion of the population in markets where Amazon can offer this bundle.

Calling this a flywheel, as Bezos did at the Recode conference, is good way of describing this dynamic.

We have been talking about this unique positioning for some time now here:

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