Amazon's Fast-Growing Video Service Has Already Overtaken Hulu, Apple

E-Commerce Giant Benefits From Longform Online Video's Growing Popularity

By Published on .

Netflix should probably start checking the rear-view mirror. Amazon has grown from a non-player in video to a significant one as more users adopt its Prime Instant Video subscription streaming service.

Amazon's online video service actually overtook Apple months ago. Now the company has leapfrogged Hulu to become the number-three streaming video service in the U.S., according to a measure of online video consumption performed by Qwilt, a firm that helps Internet providers deliver online video to consumers.

Amazon remains a long way behind leaders Netflix and Google's YouTube, which retain 57.5% and 16.9% respectively. While Amazon accounted for 3% of online video consumption in March, but that's up from just 0.6% a year ago. And with a recently unveiled connected-TV device and increasingly aggressive TV-and-movie acquisition strategy, the e-commerce giant is on an upward trajectory.

Amazon has grown significantly since September when it hit 2.3% to jump ahead of Apple (1.1%), and creep up on Hulu's 2.5%. (Hulu has also seen rapid consumption growth, from 1.5% a year ago to 2.8% last month).

Passing Apple, Hulu
By comparison network infrastructure provider Sandvine found last September that Amazon had already pulled ahead of Hulu. The e-commerce company lagged behind Apple, but the comparison isn't quite apples-to-apples since Sandvine apps, music and other media consumed through iTunes in addition to video in measuring Apple.

Qwilt's figures don't show a steep enough climb for Amazon to put Netflix in the crosshairs just yet, but YouTube may have cause for concern.

"The key significance is that longform video sites such as Amazon, Netflix and Hulu versus [predominantly short-form video services like] YouTube generate a lot more traffic volume even though they have a far less amount of subscribers," Qwilt co-founder and VP-product marketing Dan Sahar.

Between March 2013 and September 2013 and then again between September and March 2014, Netflix, Amazon, Hulu and Apple each saw their percentage of video traffic volume increase. In both timeframes, YouTube's percentage dipped.

Qwilt measures how much bandwidth a given service uses, a proxy for how much content a service's users are downloading or streaming. Those delivering high-definition, TV-length shows are going to gobble up a lot more bandwidth than YouTube which is more about short clips. YouTube's user base is also 40% mobile, so nearly a significant number are watched on thin streams to cellular devices.

Qwilt's methodology could also put Apple at a disadvantage. Because the firm is only measuring the bandwidth used to download a video, views of already-downloaded iTunes videos aren't counted. But Mr. Sahar said he doesn't believe many people re-watch downloaded movies or shows.

Lots of watch time
Nonetheless Qwilt's findings indicate the comparative time users are spending with content. That's a metric advertisers watch as they look to allocate their ad spend, especially if Amazon ever opts to expand its ad-supported video service. The the stats show that people are streaming a lot of long-form videos like movies and TV episodes and that gaming consoles constitute the top device for streaming video consumption, Mr. Sahar said.

Last week Amazon introduced Fire TV, an Apple TV-like set-top box that streams digital content to people's TVs. That content is primarily video from Amazon's video services as well as Netflix, YouTube, Hulu and others, but Amazon's Fire TV is also a gaming device. Mr. Sahar said the product could appeal to more mainstream gamers who may be unwilling to drop $500 for Microsoft's Xbox One but up to spend $99 on Fire TV. "There's a bigger market of those people versus hardcore gamers," Mr. Sahar said.

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