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Amazon Jumps Feet-First Into Video Stream

Amazon Jumps Feet-First Into Video Stream

Amazon has opened up a new video streaming channel that will allow users to instantly play movies from a library of 5,000 titles on computers and various set-top devices. The service is limited to Amazon Prime members, who pay $79 per year for free shipping on Amazon orders. However, Amazon's service could pose a threat to Netflix, which charges slightly more to access its streaming library.

By Rob Spiegel
02/22/11 12:10 PM PT

Amazon on Tuesday announced the launch of video streaming. The service gives Amazon Prime members unlimited, commercial-free instant streaming of more than 5,000 movies and TV shows.

In the Past, Amazon's Prime membership program has mostly been about free shipping -- members get free two-days shipping regardless of the purchase price for US$79 per year.

This new video-streaming benefit for Prime members charges no extra costs on top of the annual membership fee. Amazon is offering a one-month free trial of Prime.

Content can be accessed instantly on Macs, PCs, and the nearly 200 Internet-connected TVs, Blu-ray players and set-top boxes that are compatible with Amazon's instant video. For now, Amazon is not offering a stand-alone subscription -- streaming is solely an addition to the Prime service.

Prime now directly competes with the likes of Netflix. Netflix charges $8 per month for its streaming-only plan and boasts a catalog of more than 28,000 titles. While Amazon is launching Prime with only 5,000 titles, the company's overall catalog for rentals and purchase exceeds 90,000. Amazon did not respond to an E-Commerce Times' request for comment by press time.

New Hook for Prime

Streaming adds incentive for Prime membership and loads ammo to Amazon's stockpile of media delivery services.

"This is a brilliant move on the part of Amazon," Azita Arvani, principal of Arvani Group, told the E-Commerce Times. "It creates value for Amazon and its customers. It instantly offers more value for Prime members. In process, it creates a ready audience for its instant Video service."

Amazon strikes just when streaming is getting hot, which could draw new Prime members.

"It makes the Prime membership more valuable for the ones who are considering buying the membership," said Arvani. "Members are not only getting free two-day shipping, they also get video streaming service."

Free shipping and unlimited streaming can both boost sales of physical and digital products.

"Most important, it will encourage people to buy downloads of the TV shows and movies," said Arvani. "It will encourage people to stream video on their personal computers at a relatively low cost, which will act as a teaser for them to buy downloads of their favorite shows for the times when they don't have a good Internet connection."

Amazon Could Become a Threat to Netflix

While Netflix has considerably more streaming content than Amazon, if Amazon adds more content, the competition could get real.

"This is definitely a threat to Netflix's streaming service. Price-wise, Amazon's deal comes out to about $20 less a year, in addition to having two-day free shipping. Plus, Netflix has many times the selection Amazon does," said Arvani. "There are some drawbacks in Amazon Prime service now which, I would assume, will eventually be ironed out. And it is based on Adobe Flash, which makes it unplayable on iPhones or iPads. I'd assume Amazon will have an iPhone/iPad app that will allow video streaming soon."

This could be the push that Apple needs to get on the streaming bandwagon.

"Apple iTunes only offers video downloads at this point," said Arvani, though this could compel Cupertino to move to a streaming offering faster. "As an Amazon Prime member, I am happy to see the Instant Video added to the service."

A Valuable Addition to Amazon Prime

Amazon is taking a big jump into digital content delivery with Prime's streaming service.

"Amazon's launch of free watching of instant movies for Amazon Prime members simply demonstrates Amazon's intent to make its living by delivering bits instead of atoms," Carl Howe, director of anywhere consumer research at the Yankee Group, told the E-Commerce Times. "While its 5,000 movie titles remains far from Netflix's 20,000-plus, it's a great way to raise the value of its $79 Amazon Prime memberships with little apparent end-user cost, while undercutting Netflix's $96 yearly price for Watch Instantly membership."

Amazon's streaming service may benefit Prime customers without actually denting the commanding market leads held by Apple and Netflix. "Amazon's low-priced digital music competition to Apple's iTunes hasn't significantly cut into iTunes' market lead, and I doubt that this video offer will do much to stem Netflix's growth either," said Howe. "Instead, I see this offer more as a way to lock in existing Amazon Prime PC users more than garnering new mobile-focused ones."

Amazon will need to launch an iPad and iPhone app promptly if it wants to keep customers happy.

"Amazon's reliance on Flash will lock out all of Apple's iOS devices, such as the iPhone and iPad, and most of the mobile phone and tablet markets," said Howe. "As such, Amazon's offer will leave the lion's share of that larger mobile set of users to established leaders Netflix and iTunes."


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