Amazon.com (NASDAQ:AMZN) is introducing a video subscription model designed as a direct rival to Netflix (NASDAQ:NFLX) and Hulu (NASDAQ:CMCSA). The online retailer has announced a new monthly subscription option for Amazon Prime, a service for shipping and streaming video, which starts at $7.99 month. Both Netflix and Hulu charge the same price for monthly subscriptions to their respective streaming video service.
Amazon’s Prime subscriptions could only be bought for $79 a year until now. While Netflix has more content such as movies and television shows to offer, Amazon’s subscription comes with free unlimited two-day shipping on its online store. That could give the web retailer a big advantage, RBC Capital Markets analyst Sean Kim told Bloomberg. “For $7.99 on Amazon, you’re getting less video but you’re getting all this other stuff,” Kim said.
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It also gives the company an advantage going into the heavy holiday shopping season, the analyst added. “Holiday shopping is extremely important for Amazon. Anything that can get more users to the website and use Prime is a going to drive more sales,” he said.
According to Colin Sebastian of Baird Equity Research, the short-term nature of the new pricing structure could put Amazon at risk of losing money on some users. “While one risk for Amazon is that consumers use Prime for just one month to take advantage of free shipping on large purchases, the test could also reveal that a ready market for alternative pricing, and serve as a new customer acquisition tool,” Sebastian wrote in a research note to clients on Tuesday.
Amazon had reached a deal with pay-television channel Epix in September that increased the number of titles available through Prime to 25,000.
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