Not much news usually takes place on the weekend, but on Saturday afternoon, Engadget.com posted multiple screenshots of an Amazon page offering free unlimited streaming of movies and TV shows.Amazon wording on the page said, “Your Amazon Prime membership now includes unlimited, commerical-free instant streaming of 5,000 movies and TV shows at no additional cost“.
Shortly after it was reported, the Amazon user who found the page could no longer access it, but multiple screenshots at Engadget.com clearly shows the details and is the best proof yet that Amazon is getting ready to challenge Netflix with a subscription based streaming service.
Offering free streaming to Amazon Prime members would be a really interesting way for Amazon to enter the content subscription market, which was something the WSJ first reported rumours about in August of last year. For $79 a year, consumers can sign up for Amazon Prime giving them free two-day shipping from items on Amazon.com. Free shipping is good to begin with, but offering free unlimited streaming of movies and TV shows on top of that would make Prime extremely valuable and would drive a lot of people to sign up for it. At $79 a year it would be cheaper than Netflix and while Amazon would only have about 25% of the inventory Netflix has today, if they do in fact launch with 5,000 titles, one would expect Amazon to build up their inventory pretty quickly.
While I would not expect Amazon to make money from the streaming service initially, they could make up for that with the physical goods people will end up buying because they have the Prime membership. Amazon has a big advantage over Netflix of being able to allow their core business drive the growth of their streaming service without having to worry about how many members they sign up each quarter, which is exactly what Netflix is so dependent on.
Amazon’s core business could essentially subsidise the streaming service for quite some time, allowing Amazon to spend money on licensing more content and quickly expanding their inventory. In the last two years, Netflix has added about 8,000 titles at any given time to their watch now catalogue and today, it is estimated they have around 20,000 movies and TV shows. So if Amazon launches with 25% of Netflix’s inventory on day one, that’s not a bad start.
The other big advantage Amazon has over Netflix is that they also sell and rent digital copies of movies. Adding a subscription service now gives Amazon three different ways to get in front of the consumer and multiple ways to generate revenue. Netlfix does have a huge head start when it comes to the number of devices they are on, but Amazon can catch up and since they already have their Amazon Video On Demand platform working on devices like the Roku and TiVo, they aren’t starting from scratch.
The fact Amazon also sells so many of these broadband enabled devices from their website also allows them to push the distribution of devices and they could even potentially subsidise the cost of them if they wanted. Amazon could make it so that anyone who buys a Prime membership also gets a free streaming device of some kind. Considering that the Roku HD only costs $59.99 retail, it’s not unrealistic to think that Amazon would give Prime members some kind of incentive to consume more movies and TV shows. And just imagine the disruption Amazon would create in the market if they released a Kindle capable of playing video?
Now that details of the offering have leaked out, I’m sure we’ll hear more from Amazon on this pretty soon. In the mean time, the landscape for buying, renting and subscribing to TVs and movies continues to get crowded with Amazon getting ready to join Netflix, Hulu, Apple (iTunes), VUDU, Microsoft (Zune Video), Sony (PlayStation Network), BestBuy (CinemaNow.com), Blockbuster, Intel and others who are all competing for the living room.