Why Netflix and Hulu Shouldn't Worry About Amazon's New Streaming Service—Yet

Amazon Prime

Today Amazon launched Instant Video, a streaming movie and TV service that features more than 5,000 titles. The long-rumored service is offered for no additional cost to members of Amazon Prime, the company's loyalty program, which gives customers all-you-can-eat free two-day shipping for a $79 annual fee, and already boasts millions of members. At $79 a year—or $6.58 per month—Amazon's new service is less expensive than subscriptions for Netflix and Hulu, which cost $7.99.

Will Amazon's service have a big impact on the latter companies?

To some degree, Amazon is now a competitor to Hulu and Netflix, but the competition is indirect. Hulu and Netflix more recently have focused on delivering fresher content to customers. Amazon Instant Video is more or less centered on longer-tail content.

"It's a mix—movies from Sony and Warner Bros. tend to be a little older, five to seven years, but we've got some more recent movies," says Cameron Janes, director of Amazon Instant Video. "You are not going to find day-and-date movies. You're not going to find brand-new movies in here because the movies are generally older." The same goes for television. "We don't have day-after-broadcast TV in our Prime offering," Janes says.

What's more, in addition to offering newer content, Netflix also offers a much larger library, with an estimated 20,000 titles available for streaming, quadruple Amazon's offerings. In a letter to customers featured prominently on Amazon.com today, Amazon CEO Jeff Bezos touted the new offerings, from March of the Penguins to The Dick Van Dyke Show. Of the 18 titles Bezos listed, 16 of them are also available for instant streaming on Netflix.

Amazon Prime

Instant Video appears to be aimed less at Netflix and Hulu, and more at attracting new customers to Amazon Prime. When users search for a movie title online now, they'll will be peppered with benefits of the program. Searching for The Girl Who Kicked the Hornet's Nest, for example, non-members will see that they can buy the DVD for $15, not including shipping fees, or rent or buy the film via streaming for $3.99 or $11.99, respectively. However, if they become members of Prime—for only $6.58 a month—they won't have to spend a penny on the film, since it's available on Instant Video. (And if they still want the DVD, there's always free shipping.)

Those ramped up benefits might be enough to pull Amazon users over to Amazon Prime. But will it be enough to sway users into canceling their Netflx and Hulu subscriptions? It's too early to say. As Janes says, "We're just getting started."

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