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Amazon competing with Netflix in online movies

by Kelly MacNeil on February 23, 2011

Amazon.com is broaching Netflix territory with its announcement on February 22 that it would offer streaming movies and TV shows to customers online, according to The Wall Street Journal.

The service is currently offered only to customers enrolled in the Amazon Prime packing-shipping program, which charges $79 per year, a fee lower than Netflix's $96 per year for the same service, according to a second Wall Street Journal article.

This is a big move by Amazon.com, seen in the stock market reaction on Tuesday of a 6 percent decline in Netflix stock. However, industry analysts say that Netflix will still dominate the market – at least for the moment – with its greater content offerings.

"Amazon presently offers about 5,000 movies and TV shows whereas Netflix offers close to about 30,000. Furthermore, Netflix has licensing arrangements with Starz and Epix that provide access to recent Disney, Lionsgate and Sony films. Amazon lacks this. Competing toe-to-toe with Netflix would ultimately mean licensing more content, which may mean paying licensing costs comparable to what Netflix has established in the market," Justin Patterson, an analyst at Morgan Keegan, told the news source.

The new service is called Amazon Instant Video. Amazon Founder and CEO, Jeff Bezos, posted a letter to customers on the main Amazon.com webpage on Wednesday, February 23.

"Dear customers, millions of people are already Amazon Prime members and enjoy unlimited free two-day shipping," reads the letter. "Today, we're excited to add a brand new benefit to Amazon Prime. …You'll find movies like The Girl with the Dragon Tattoo trilogy, Amadeus [and] kids shows like Arthur, Caillou, Super Why! and Mister Rogers' Neighborhood."

The Amazon.com letter listed 18 movies and TV shows, out of which 16 are also currently available on Netflix, according to CNN.

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