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Amazon Streaming Service Sighted

31 Jan, 2011 By: Erik Gruenwedel

Amazon’s much-anticipated foray into content streaming reportedly received a fissure of credibility when a screen shot purporting such a service materialized online briefly during the weekend.

The unlimited subscription option ($79 annually) would offer about 5,000 titles in standard definition and be an add-on to Amazon’s Prime service, which currently offers 72-hour transactional video-on-demand rentals and electronic sellthrough, according to Engadget.com.

The annual fee, if accurate, would cost less than a year of Netflix streaming at $96, or $7.99 per month.

Amazon, which recently acquired remaining interest in streaming/disc service Lovefilm International in the United Kingdom, has been rumored to be launching a subscription service aimed at undermining market trailblazer/leader Netflix. At its financial last week, Thomas Szkutak, Amazon SVP and CFO, said followers would have to “stay tuned” to see how Amazon leverages its recent acquisition of Lovefilm.

Engadget reported that subsequent efforts to track down additional information and/or links to the Amazon service proved unsuccessful.

Analyst Eric Wold with Merriman Capital in New York said he wasn’t able to get confirmation from Amazon, but did track down the domain name www.primeinstantvideos.com, which is owned by an Amazon subsidiary.

“We continue to believe Amazon is one of two potential strategic partners for Redbox (Walmart remains our most likely candidate) and that this streaming offering could be part of a combined online/offline subscription plan,” Wold wrote in a Jan. 31 note.

Netflix CEO Reed Hastings has been forthright with discussing potential competitors to the streaming market it all but invented. In Netflix’s most recent fiscal call, Hastings said he expects third parties to enter the streaming space and believes it has established a sound first-mover position to compete effectively.

Wold said Netflix's exclusive content deals and CE relationships allow it to compete effectively against new domestic entrants, which it did successfully in the DVD-by-mail segment.

“Further global expansion in the [second half of 2011] will demonstrate the true value potential of the [Netflix] franchise,” he wrote.

Richard Greenfield with BTIG Research in New York said the brief glimpse at Amazon’s nascent streaming effort revealed scant content, which he said bodes well for content holders (studios) and secondary distributors such as Starz and Epix.

“While Amazon might have interest in sub-licensing content near-term to bulk up its content offering, longer-term, we suspect they could have interest in eliminating the ‘middle-man’ for content and seek to acquire pay window rights directly from the studios,” Greenfield wrote in a post. “We fully expect Netflix to pursue this path and now Amazon may help drive prices up even higher as currently output deals expire.”

On the flipside, Greenfield said an Amazon streaming service would devalue further the value of content to consumers. He said despite the fact Amazon often offers free shipping on packaged media purchases, he said it would be farfetched to imagine consumers continuing to purchase TV DVDs.

Studios thus far have been reluctant to offer new release movies into the streaming channel — a strategy that is not likely to change even with Amazon’s presence.

“Hard to imagine ever buying a [TV series] for $11.99, when you can stream it for free an unlimited number of times for $6.58 per month,” Greenfield wrote.


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