It seems that Amazon.com has decided to start an online video subscription service as the company has started talks with media companies including Time Warner, said three people who are privy to Amazon’s plans, reports Businessweek. Amazon’s move is seen as a direct challenge to rival Netflix Inc.
The service would come with a monthly fee and it would consist of older films and TV shows, said the people, who wished to remain anonymous. The sources remarked that the talks are early and it may not materialize.
The people said that Amazon has contacted Time Warner, MTV owner Viacom Inc. and General Electric Co.’s NBC Universal. Amazon.com Chief Executive Officer Jeff Bezos is highly interested in broadening the digital entertainment services of the company to combat rivals such as Netflix, Hulu LLC and Apple Inc.
Amazon is planning to structure its content deals in ways similar to Netflix, said one of the people. Netflix pays media companies for rights to stream TV shows and films over the internet. “A serious move into subscription content -- while perhaps appropriate strategically -- could further weigh on earnings capability,” Douglas Anmuth, an analyst with Barclays Capital Inc. in New York, wrote in a note today. Anmuth rates Amazon “overweight.”
We all know that Amazon possesses the brand and user base to compete in online streaming but it may find it expensive to acquire the content. On the other hand, Netflix is a better position because it has a hybrid subscription model with streaming and mail-order DVDs. The model helped Netflix to subsidize the shift to streaming.
