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Analyst: Netflix vs. Amazon Streaming War Looming

10 Jan, 2012 By: Erik Gruenwedel

When LoveFilm Instant Jan. 9 cut the monthly subscription price the day Netflix formally launched streaming operations in the United Kingdom and Ireland, it signaled the beginning of what one analyst says will evolve into a protracted turf/price war between Amazon and Netflix playing out on both sides of the Atlantic.

LoveFilm Instant is a standalone streaming service launched in December in the United Kingdom by Amazon-owned by-mail disc rental service LoveFilm — the latter claiming 2 million subscribers through parts of Western Europe.

While the immediate battle is for European subs, that skirmish is expected to intensify domestically in the future as Amazon moves to create a standalone service separate from its current streaming value-add to the $79 annual Prime membership loyalty program, according to BTIG Research analyst Richard Greenfield.

Greenfield expects that should Amazon launch a standalone streaming service in the United States, it would charge about $5 monthly due in part to an inferior content offering compared with Netflix, which is spending more than $1 billion this year on digital rights.

Amazon last month added prior seasons of Fox’s “Glee” and “Sons of Anarchy,” to buttress Prime’s content offerings. That said, Amazon also has thriving packaged media and transactional VOD platforms — both of which would likely feel competitive pressure from an in-house streaming service.

“Given the staggering daily usage of Netflix in the U.S. (over an hour per day per household across 21 million homes), we expect Amazon to attack the streaming opportunity with increased vigor in 2012,” Greenfield wrote in a Jan. 10 blog. “Amazon follows the consumer and consumers clearly love streaming content on demand as part of a subscription.”

In a Jan. 9 BBC interview with Netflix CEO Reed Hastings, he explains the virtues of Netflix over LoveFilm — note Hastings' past-tense reference to Netflix's disc rental service.

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