Online retailer Amazon.com, Inc. said Tuesday its Prime members can now stream unlimited, commercial-free, instant streaming of more than 5,000 movies and TV shows at no additional cost. Prime membership will continue to be $79 per year.
Let's take a look at the key reasons why Amazon has launched this service.
* Amazon wants to play a bigger role in the lucrative streaming industry leveraging its 60 million plus monthly uniques and strong fan following for Prime service, Caris analyst Sandeep Aggarwal wrote in a note to clients.
* Aggarwal said home movie watching (Online, in-store DVD rental, DVD sales, kiosks) is a $24 billion plus industry in the US and for film content theatrical releases account for $10 billion. Given that TV programming is also streamed on the Web, the addressable market for Amazon is now bigger than the $40 billion US film industry and is in excess of $100 billion, including TV programming.
*Amazon has an industry leading offering for eBooks in the form of Kindle and its On Demand Video has decent depth and breadth of content. Amazon has been operating a Video-On-Demand streaming service for years with more than 90,000 titles. So, it is probably the right time for the company to expand into the fast-growing subscription-based streaming content.
* Amazon could take this opportunity to leverage its recent $200 million acquisition of London-based online video rental firm Lovefilm to expand internationally as well. In January 2011, Lovefilm claimed to have over 1,500,000 members, over 67,000 titles, and over 4 million rentals per month across five countries.
* The launch of the unlimited streaming service gives an opportunity for Amazon to compete with Netflix that too in its own forte. Amazon is providing the unlimited streaming service at no additional cost and is cheaper than the market leader Netflix, which offers the service for $96 per year. Given Amazon's brand, user base, technology platform and lower price, it's likely to disrupt Netflix' subscriber growth over the next several quarters, Jefferies analyst Youssef Squali wrote in a note to clients.