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Amazon Challenges Netflix With Streaming Service

Amazon Prime subscribers will gain access to streamed movies at no additional cost.

Thomas Claburn

February 22, 2011

2 Min Read

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Amazon on Monday amplified its competition with Netflix by offering Amazon Prime members the ability to stream videos at no extra charge.

"Millions of Amazon Prime members already enjoy the convenience of free two-day shipping," said Robbie Schwietzer, VP of Amazon Prime, in a statement. "Adding unlimited instant access to thousands of movies and TV shows at no additional cost is a great way to give members even more value for their $79 annual Amazon Prime membership."

Amazon Prime was initially a program that offered subscribers free shipping in exchange for the annual fee. Amazon says it has "millions" of Prime members but has not disclosed specific figures. In 2009, Piper Jaffray analyst Gene Munster estimated there are at least two million of them and that the program was growing at a rate of 24% per year.

Amazon has a ways to go before it matches Netflix's offering. Netflix has over 20 million subscribers in the U.S. and Canada and at least two-thirds of them use the company's video streaming service.

And Amazon's library of streaming titles (over 5,000) is significantly smaller than Netflix's (over 20,000). But that gap is likely to close over time as Amazon strikes more deals with movie studios.

Netflix investors appear to be considering that possibility. The company's stock was down almost 6% on Monday, about twice the percentage point loss of the Nasdaq and of Amazon.

However, Amazon may end up hurting itself if its competition with Netflix goes too well: Netflix pays Amazon Web Services for the IT infrastructure that supports its member Web site and Netflix-ready hardware like the Xbox, PS3, Wii, AppleTV, iPhone, and iPad.

About the Author(s)

Thomas Claburn

Editor at Large, Enterprise Mobility

Thomas Claburn has been writing about business and technology since 1996, for publications such as New Architect, PC Computing, InformationWeek, Salon, Wired, and Ziff Davis Smart Business. Before that, he worked in film and television, having earned a not particularly useful master's degree in film production. He wrote the original treatment for 3DO's Killing Time, a short story that appeared in On Spec, and the screenplay for an independent film called The Hanged Man, which he would later direct. He's the author of a science fiction novel, Reflecting Fires, and a sadly neglected blog, Lot 49. His iPhone game, Blocfall, is available through the iTunes App Store. His wife is a talented jazz singer; he does not sing, which is for the best.

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