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Netflix expects heightened competition from Amazon.com

January 25, 2012 |  4:27 pm

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Netflix said Wednesday it expects Amazon.com to soon offer a competitive stand-alone video streaming service, and to undercut it with a cheaper price.

Currently, Amazon.com offers access to about 12,000 movies and television episodes to people who pay $79 per year for its "Prime" service, which includes free two-day shipping on many items. The video content, which includes a variety of television repeats and older movies, can be watched on a number of digital devices including Amazon's own Kindle Fire tablet.

Offering "Prime Instant Videos" as a stand-alone service, however, could pose a more serious competitive threat to Netflix, particularly if the online retail giant charges less than Netflix's $8 per month streaming fee.

But in a letter to shareholders in which they made the prediction, Netflix Chief Executive Reed Hastings and Chief Financial Officer David Wells pointed out that Amazon has "a fraction of our content." Notably, Netflix currently has exclusive movie deals with Paramount Pictures and Lionsgate movies, through the studios' pay cable channel Epix, and repeats of television shows from the CW network.

An Amazon spokeswoman did not immediately respond to a request for comment.

Hulu also offers a rival subscription service for $8 per month, but Hastings and Wells dismissed its competitive threat by pointing out that Hulu includes commercials with its offerings. "Even if Hulu could afford our level of content spend," the executives wrote, "at the same price, consumers would prefer commercial-free Netflix over commercial-interrupted Hulu Plus."

The biggest competitive threat, Hastings and Wells maintained, is from digital offerings that complement cable TV subscriptions. In the letter they specifically praised HBO Go, saying it "will become a more effective competitor over time," and called Showtime's similar digital application "very impressive."

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-- Ben Fritz

Photo: Amazon.com's Amazon Prime Instant Video Web page.

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