UPDATE: Amazon Adds Streaming-Video Service For Prime Members
February 22 2011 - 12:30PM
Dow Jones News
Amazon.com Inc. (AMZN) has launched a streaming-video
subscription service, bolstering the online retailing giant's
position in the fast-moving online video business and putting it in
more direct competition with Netflix Inc. (NFLX).
Amazon, in an anticipated move, said it would make 5,000 movies
and TV shows available for unlimited online streaming to members of
its existing Amazon Prime offering, which costs $79 per year and
includes free two-day shipping and reduced one-day shipping rates
on items purchased on its site.
The company already sells and rents movies online on an a la
carte basis through digital downloads and streaming. Its new
subscription service allows access to mostly older movies and shows
from a variety of studios.
The offering comes as media companies try to adjust to consumers
increasingly wanting to watch video online and puts Amazon as a
direct competitor to Netflix, which recently reported its
subscriber count exceeded 20 million in a sign of consumer demand
for more online video.
"This is just a starting point for us," said Cameron Janes,
director of Amazon's instant video service. "We expect to grow the
category over time."
Janes declined to comment on Amazon's prospects for competing
with Netflix, saying the company is focused on providing its
customers with a quality online video experience. The price of
Amazon Prime undercuts the price Netflix's streaming service by
about $17 per year, even before factoring in the shipping values
included. Netflix, however, has a head start in the business, with
stronger content offerings and a brand more closely associated with
video entertainment.
Shares of Amazon recently slid 1.8% to $183.20. Netflix shares
fell 4.9% to $224.
Other tech companies like Apple Inc. (AAPL) and Google Inc.
(GOOG) have shown an appetite for investing in online video
services, as the rise of digital media promises to transform the
way filmmakers do business.
Netflix offers its streaming video service for $7.99 per month,
providing access to some content just months after its DVD-release
through deals with premium movie networks Starz Entertainment and
Epix LLC.
Starz, which is owned by Liberty Media Corp. (LCAPA, LINTA,
LSTZA), provides access to films from major studios owned by Walt
Disney Co. (DIS) and Sony Corp. (SNE). Epix also offers timely
content from its owners--Viacom Inc.'s Paramount Pictures, Lions
Gate Entertainment Inc. (LGF) and Metro-Goldwyn-Meyer Inc.
Netflix's success also demonstrates the appeal of older library
content from studios that makes up the bulk of its streaming
service. Its success has raised concern in the industry that such
low-cost movie services are weighing down the value of content at a
time when online piracy is also damaging the business.
Some analysts believe that online video services will encourage
consumers to go without a traditional pay-TV subscription, which
provides a key revenue stream for major entertainment
conglomerates.
Janes said the majority of the major studio content offered in
Amazon's new streaming service is library content that is five to
seven years old. Movies like "Syriana" and "March of the Penguins"
are available from Time Warner Inc.'s (TWX) Warner Bros., while
films like "Charlie's Angels" and "Stripes" are available from Sony
Entertainment. It also has relationships with independent studios,
like Music Box Films, which provides access to "The Girl With The
Dragon Tattoo" film trilogy.
Amazon's a la carte service offers access to 90,000 film and TV
shows, including more current fare.
Amazon has also delved into publishing e-books through its
Digital Text system, which allows writers to upload and sell
manuscripts without professional editing that can be read on its
Kindle e-reader.
A blog report last month had fueled talk about Amazon's plans to
launch the service to compete with Netflix.
Last month, Amazon reported its fourth-quarter earnings rose
8.3%, better than expected, as revenue jumped 36%, although the
growth fell short of Wall Street's estimates.
-By Nat Worden, Dow Jones Newswires; 212-416-2472;
nat.worden@dowjones.com
--John Kell contributed to this article.
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