Evolving a business is difficult because it seemingly requires you to take your eye off what drove profits in the past to find what will bring strong margins tomorrow. But look ahead you must; after all, the business world is littered with cautionary tales of those who did not: IBM’s hardware obsession in the 1970s led it to miss the PC operating system opportunity; Kodak pushing film as digital cameras killed the photo developing industry; Microsoft wasting away first-mover advantage in tablets for nearly a decade to be beat by Apple’s iPad core.
So kudos to Amazon for making a brilliant evolutionary chess move. On Tuesday, Amazon launched a service giving away movie streaming to members who subscribe to its $79-a-year “Prime” premium shipping service. Amazon Prime was already one of the smartest moves in ecommerce, building loyalty among shoppers while charging them more for “free” 2-day shipping. (It’s “free” shipping, you see, if you spend $79 a year for access to it. And once you spend $79 a year, well you better buy a lot of books, spending more of your money to get more of that great “free” shipping.) Amazon Prime is a sticky pricing gambit that makes consumers feel good while sending dollars straight to Amazon’s bottom line.
Now, Amazon has made the shipping deal seem even sweeter by adding “free” access to 5,700 films and TV shows, giving Netflix a competitive whack at the same time. It’s an arrow shot straight at the future of digital content, while tying consumers to Amazon’s current core product, hard goods shipped by mail. All we can say is Amazon, your strategy is Prime.