Amazon Takes a Shot at Netflix With Unlimited Streaming

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 |  Includes: AMZN, NFLX
by: Larry Dignan

Amazon (NASDAQ:AMZN) on Tuesday added unlimited streaming of movies and TV shows to its Prime subscription plan. While the move is billed as Amazon vs. Netflix (NASDAQ:NFLX) the move really just highlights what’s possible with the Prime model.

First, the basics. Amazon Prime runs you $79 a year and now you get unlimited streaming to go with free two day shipping. On the surface, Amazon is taking target practice at Netflix. Netflix’s streaming only service runs you $7.99 a month. All things being equal, Amazon just undercut Netflix’s pricing.

There’s little doubt that Amazon is looking to hit Netflix. However, there is a bigger picture. Remember the Prime program is designed to get you to shop more and allow Amazon to grow its wallet share.

When shipping is removed as a barrier, shoppers spend more dough. Amazon rivals clearly see the threat from Prime. As a result, a bevy of competitors such as Toys R Us, Drugstore.com and others have joined Shoprunner, which offers free shipping and deals via participating stores. Shoprunner is a unit of GSI Commerce, which competes with Amazon on the fulfillment side of the e-commerce equation.

GSI handles the fulfillment for companies like Toys R Us and Dicks Sporting Goods. Incidentally, Shoprunner’s annual fee is $79 too.

In its initial incarnation, Prime was easy to replicate by GSI Commerce’s Shoprunner. Now Amazon has thrown in video the equation has changed again. Simply put, Amazon is playing a little offense and defense with its Prime program.

Streaming movies are likely to be just a start. Amazon could provide free Kindles to all Prime subscribers. Perhaps Amazon offers Web backup services via Amazon Web Services. You get the idea. Amazon could offer a lot of goodies to Prime subscribers—and probably will.