Amazon Launches Streaming Video Service

In a challenge to Netflix, the company is bundling its Amazon Prime service with 5,000 movies and TV shows from such content companies as Warner Bros., Sony and the BBC.

NEW YORK – has officially launched a much-awaited competitor to Netflix’s streaming service, which has made the company the second-largest U.S. subscription media business.

Amazon, led by CEO Jeff Bezos, now is promoting its commercial-free, unlimited streaming video service featuring 5,000 movies and TV shows as part of its Amazon Prime shipping service, which carries an annual subscription fee of $79. Initial product consists mostly of library film titles from Warner Bros. - Time Warner CEO Jeff Bewkes has long argued that Netflix won't be the only streaming content provider of note and would have to pay up for current Hollywood product - and Sony along with BBC TV series.

Tech blog Engadget had last month discovered a screen shot of an ad that briefly previewed the service, but now Amazon is officially promoting the service on its site, including a one-month trial.

Some observers had wondered whether Amazon had enough content deals in place to launch the service early in the year, while others said it would initially likely focus on library product and smaller films.

Among the films Amazon lists on its Web site as being part of the service are Syriana, Amadeus, The Ant Bully, One Flew Over the Cuckoo’s Nest, Batman Returns, Best in Show, March of the Penguins, Hairspray, McG's Charlie's Angels, The Last Emperor and the Swedish version of the Girl With the Dragon Tattoo trilogy. Among TV shows, it lists such U.K. series as Skins, The Office, Fawlty Towers, Torchwood, but also The Dick Van Dyke Show.

Lazard Capital Markets analyst Barton Crockett previously said that with its own streaming offer, Amazon “could become Netflix’s first meaningful streaming competitor.” The bundled offer “highlights the potential for Amazon to “superset” Netflix, or offer Netflix’s core streaming feature as part of a more valuable, broader package,” Crockett argued.

Amazon Prime’s $79 price tag for one year compares with Netflix’s streaming-only subscription of $95.88. Amid a broader stock market decline, Netflix shares fell 5.9 percent Tuesday to close at $221.60.

Goldman Sachs analyst James Mitchell said Amazon may not be a major streaming contender yet with the initial content offers. "The risk is whether Amazon adds more new U.S. movies," he said.

"For Big Media, we view the announcement as "good news/bad news"," said Credit Suisse analyst Spencer Wang. "On one hand, competition for Netflix and another bidder for digital content is a positive. However, longer term, we remain concerned that proliferation of over-the-top services could lead to cord cutting. Should this happen, cable network economics could be hurt by lower affiliate and ad revenue, as pay TV subs decline. While studios may benefit from OTT providers acquiring digital rights, the issue for media firms is that cable network profit dollars are much bigger than studio profit dollars and the Street applies a higher multiple to the former."

For Netflix, rising competition could have effects on its subscriber growth and content costs, which may rise, Wang argued. "That being said, we are increasingly confident in Netflix’s ability to execute and highlight Netflix’s early lead and scale advantage, in terms of subscribers (20 million+) and content partnerships (20,000 streaming titles in the U.S.), which should continue to fuel Netflix’s virtuous cycle," he said.