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Amazon poised to launch online movie service to rival Netflix [Updated]

February 1, 2011 |  1:28 pm

Amazon.com is gearing up to be the first direct competitor to Netflix's popular online movie service.

The Web's biggest retailer has held talks with the Hollywood studios and several independent companies about acquiring library content for a subscription movie streaming service similar to Netflix, according to people familiar with the matter.

The online retail giant has already scooped up rights to some independently produced movies but has yet to strike a deal with any of Hollywood's big six studios, those people said.

Amazon has told studio executives that the company wanted to launch the service in early to mid-February but has delayed those plans until at least later in the month to deal with some technical glitches and to acquire more content. It is still unclear when the service will go live.

Studio executives say they are weighing several issues as they consider signing up with Amazon, including whether the retailer will be willing to pay as much for content as Netflix, and how it might affect the sale of DVDs and the value of current and future distribution deals with cable networks.

A spokeswoman for Amazon, which already rents and sells digital copies of movies and television shows on an individual-transaction basis, declined to comment.

Amazon is not the only Web-based company looking to take on Netflix, though it does appear to be the farthest along. Online television distributor Hulu has talked to several studios about adding films to its subscription service Hulu Plus, according to people close to the situation. Netflix has a growing amount of TV content, which has already put the two companies into competition. [Update, 3:55 p.m.: Hulu Plus currently has a small number of movies.]

Many potential competitors have been eyeing the success of Netflix, which added 7.7 million subscribers in 2010, bringing its total to 20 million, and saw its stock price more than triple in the last year.

A spokeswoman for Hulu declined to comment.

Both Amazon and Hulu are looking primarily at older movie titles that have completed their runs on pay cable networks such as HBO, Epix and Starz, meaning it would be at least seven years after their theatrical release. Acquiring rights to movies currently airing on pay cable, as Netflix has done in deals with Epix and Starz, can be very expensive. Netflix is paying Epix up to $1 billion over five years.

As previously reported when Amazon first began seriously considering launching an online offering similar to Netflix's last summer, the service will be part of the company's Amazon Prime. People who pay $79 a year for unlimited shipping would also get free access to streaming movies. That's less expensive than even the cheapest Netflix plan, which costs $95.88 a year but includes significantly more content than Amazon is likely to initially have.

While Amazon has yet to set a launch date, a screen shot featured on the technology blog Engadget this past weekend showed what appeared to be a subscription streaming option for the movie "The Girl Who Kicked the Hornet's Nest." It appears that "Hornet's Nest" distributor Music Box Films will be part of the Amazon service when it launches.

-- Ben Fritz

Related:

Redbox and Amazon gunning for Netflix's subscription business

Amazon acquired Lovefilm, the Netflix of Europe

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