Amazon Readies A "Near-Free" Streaming Service

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Amazon Readies A "Near-Free" Streaming Service
By Szk7788 (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

The online retail giant already offers a streaming service and, like Netflix, Inc. (NASDAQ:NFLX), has also moved into original programming with “Alpha House” and others, but in order to stream users must be Amazon Prime members. Prime membership costs $99 annually, but for frequent Amazon.com, Inc. (NASDAQ:AMZN) shoppers it’s a steal given that the service includes free two-day shipping for the year as well as the streaming service. An annually Netflix membership costs around $96.

Now, Amazon.com, Inc. (NASDAQ:AMZN) intends to offer ad-supported low-cost streaming to all that visit its site, something that was reported in March but quickly debunked. Today, however, The New York Post reported that they have sources that have confirmed that this new streaming option is imminent.

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Netflix killer?

“If they do an ad-supported service, they will decouple it from Prime and that is a Netflix killer,” Wedbush Securities analyst Michael Pachter said. “It won’t be $99 a year.”
Pachter believes that Amazon will seriously undercut Netflix’s $7.99 given the addition of ads.

“Who wouldn’t switch if you were poor or you’re a cord-cutter?” he continued.

While Amazon doesn’t have the library that Netflix does, it does have a vast array of offerings including its library of former HBO programs like “The Sopranos.”

“The main point is to bring in more users that you can eventually up-sell to Prime, or to get to a broader audience that doesn’t want to pay for Prime, in order to increase their video share,” said the New York Post’s source.

Amazon Prime streaming grows

Potentially, that could be big a big audience for Prime given the money one can save in shipping and the convenience of two-day delivery. Present Prime members do use Amazon.com, Inc. (NASDAQ:AMZN)’s streaming service, as indicated by yesterday’s Sandvine Corporation (TSE:SVC) study that I covered here. Amazon’s broadband traffic on fixed networks rose from 1.6% to 2.6% in the last six months. Putting that in perspective, during peak hours in the United States Netflix accounts for 35% of bandwidth use. Still, it’s a gain.

Amazon doesn’t share how many Prime members it has but it is largely believed to be in the neighborhood of 50 million.

Potential advertisers will be easy to find given the ease by which they can gauge whether their ads led to sales on the Amazon site.

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