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Amazon Launches ‘Prime’ Streaming Service

22 Feb, 2011 By: Erik Gruenwedel


Amazon Feb. 22 formally bowed a streaming service offering more than 5,000 TV shows and movies to annual subscribers.

Amazon Prime Instant Video allows the online commerce behemoth’s Prime members free access to the content, which is playable on most Internet-connected devices, including Roku and TiVo. Annual Prime membership is $79, or $1.35 per month less than Netflix’s streaming service. The program also gives members free two-day shipping on most physical product orders, and one-day shipping for $3.99 for each item.

Amazon is offering free one-month trial memberships at www.amazon.com/primevideos.

Content selections include mostly catalog and independent fare such as The Girl with the Dragon Tattoo trilogy, Amadeus, Syriana, and Chariots of Fire; noted documentaries such as Food Inc., March of the Penguins and Ken Burns’ National Parks; plus TV shows, such as “Doctor Who,” “Farscape,” “Fawlty Towers” and children’s shows such as “Arthur,” “Caillou,” “Super Why!” and “Mister Rogers’ Neighborhood.”

Other features of the service intended to upstage Netflix, included the ability to share the service with up to three family members' video devices.

“In addition to now offering unlimited, commercial-free, instant streaming of 5,000 movies and TV shows to Amazon Prime members, we continue to offer all customers more than 90,000 movies and TV shows through Amazon Instant Video,” said Cameron Janes, director of Amazon Instant Video. “With Amazon Instant Video customers can rent or purchase hit movies, such as ‘The Social Network’ as well as purchase the latest TV shows available the day-after they broadcast.”

Eric Wold, analyst with Merriman Capital in New York, said Amazon has the deep pockets to undercut Netflix pricing but not much else.

"Given that Netflix has a significant amount of exclusive streaming content [more than 11,500 titles] and a wide lead in relationships and placements on CE devices (especially on the home screens of Internet enabled devices), I think it will be tough for Amazon to do much damage except fight for second place," Wold said.

Edward Woo with Wedbush Securities in Los Angeles disagrees. Woo thinks Amazon's entrance into streaming will slow Netflix's astronomical growth rate, which continues to awe most observers.

"While I don’t think there’s going to be a mass migration from Netflix, Amazon had a large base of Prime customers (estimated at about 5 million subs), and can leverage its large cash flow from its ecommerce business; making it very formidable competitor. At the very least, Netflix no longer has a near monopoly on subscription VOD."

Ralph Schackart, analyst with William Blair & Co. in Chicago, said Amazon’s inferior video library shouldn't be a long-term issue considering its roughly $9 billion in cash. In addition, Schackart said the announcement highlights that the worldwide DVD market of $40 billionplus is a big enough to entice a large Internet giant such as Amazon,
and we "expect more digital video competition" going forward.

But Wold doesn't think Amazon will overspend for content.

"We would be surprised if Amazon would be willing to pay top dollar for key content with only a few million (estimated) subscribers knowing that Netflix management waited until the company had 15 million-plus subscribers before paying up for the Epix content."

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