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Watch out Netflix—Amazon Launches Video Streaming

Tuesday, 22 Feb 2011 | 1:38 PM ET
Amazon.com
Amazon.com

After months of rumors and speculation Amazonis launching its long-anticipated instant video streaming service — a direct competitor to Netflix.

Amazon's new service, which will stream 5,000 movies and TV shows is now available to members of "Amazon Prime,"the e-tailer's $79 annual program for free two-day shipping. "Amazonn Prime" members will get the service at no additional cost — a whole new reason to sign of up for "Amazon Prime."

In contrast, Netflix's unlimited streaming option provides access to about 20,000 movies and TV shows for $7.99 a month, which adds up to $95.88 per year. Amazon's library may be just a quarter the size, but it's still Netflix's first real competitor — sending Netflix shares lower Tuesday morning. And presumably, Amazon is working to build up its streaming library to near Netflix's levels.

Will Netflix subscribers jump ship in favor of Amazon's service? That's unlikely to happen just yet, based on the disparity of movie options. But this should make "Amazon Prime" members more loyal, and if Amazon ramps up the breadth of its library it could become a real threat.

Hollywood will likely welcome the new distribution option — there's no reason their films have to be exclusive to either Netflix or Redbox, so this provides yet another digital revenue stream. And to compare Hollywood to the music business, having another digital player is a good thing. The music industry bemoans the fact that Apple became *the* dominant digital player, and Steve Jobs had the power to set prices, leaving music labels no room to negotiate. With multiple distribution options, studios should have more flexibility.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.