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Amazon, Netflix Still Mum on Download Plans

27 Jul, 2006 By: Jessica Wolf

Online powerhouses Netflix.com and Amazon.com both recently fielded queries about their respective plans for digital movie downloading.

Amazon executives were taciturn on an earnings call, hinting only that digital is part of the company's long-term plans.

“We're not prepared to talk about it at this time,” CEO Jeff Bezos said Tuesday. The buzz is that Amazon is close to unveiling a digital download service for feature films priced at $10 or so.

A day earlier, Netflix execs were at least willing to broach the subject.

The company is investing in developments for digital delivery, and will present further information on that front after the end of the year, said Netflix CEO Reed Hastings.

New announcements about companies and content holders getting into digital delivery are creating the false impression that it's currently a viable competitor to traditional rental or sales of DVD, Hastings said.

“Movie downloading will evolve in the next decade, but it will do so slowly,” he said, pointing out that eight years after Napster and five years after Apple's launch of the iPod, nearly 90% of music sales still come from physical CDs. “DVD won't be dominant forever, but it will be dominant for a very very long time.”

Downloading services, as they stand now, show no growth in actual traffic — “Nada,” Hastings said.

Nevertheless, Netflix will enter the fray, Hastings said.

“Movie downloading may be miniscule, but we intend to be the leader before it explodes,” he said.

Meanwhile, both companies are still entrenched in packaged video.

Amazon.com saw a 15% increase in the second quarter sales of its media category, which includes DVD/VHS, books, music, video games and computer software. The company also marked that it boosted discounts on DVD preorders in the second quarter by 25%.

Overall, legal issues and a defunct deal with Toys R Us left Amazon with just $22 million for the second quarter, a near 60% year-over-year drop. Revenue was up 22% over Q2 2005 at $2.14 billion, in line with estimates.

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