June 3, 2008
Amazon.com CEO Jeff Bezos said today that his company is scheduled to launch a new streaming
video service in the next several weeks. He also said his company is very serious about music and
movies, and is currently developing a streaming version of a video on-demand service that will
soon be offered.
However, Bezos didn't offer to elaborate further, and company officials declined to provide more
information to questions. Amazon has "nothing further to announce at this time," company spokesperson
Heather Huntoon told various reporters.
Amazon's announcement comes hard on the heels of recent news that the online book selling giant
has dropped the price of Kindle, its electronic reading device, from $399 to $359. But Bezos did
point out that the price cut wasn't in anticipation of the imminent release of a newer model.
Amazon has been working to increase its digital media offerings in order to better compete
with rivals such as iTunes. Besides Kindle, which it launched not long ago, the Seattle-based
company has begun offering digital music, downloadable movies, TV shows and videos on its site.
Amazon has also forged a deal with TiVo that lets users rent videos from Amazon's Unbox service
and watch them on their TVs. Asked whether movies will be delivered in an integrated fashion or
via a separate box in the coming years, "My own guess is that separate boxes are an intermediate
step. Streaming capabilities will be built directly into television sets," Bezos said.
Meanwhile, Netflix just recently said it is also working on streaming video offerings. "I think
this is the way the whole industry is going," said Greg Sterling, founder of Sterling Market
"We're a few years away from this being a mainstream phenomenon, but it will eventually replace
the video stores and soon the whole Netflix model will be obsolete," Sterling noted. "It's going
to come down to price, selection and quality."
"I applaud the development," said Phil Leigh, senior analyst with Inside Digital Media. "I'm
not surprised because Amazon is an innovative company that clearly understands what the consumer
wants out of the Internet."
"I don't think it's going to move the needle on iTunes -- certainly the Amazon music store
hasn't," Leigh said. What we'll ultimately see is that "a big part of music and video will come
over the Internet in ad-supported business models. As far as video, I wouldn't be surprised to
see them rely increasingly on overlay ads."
A streaming business could make good sense for Amazon, Kurt Scherf, vice president and principal
analyst with Parks Associates. Whatever Amazon gets will be largely dependent on what the studios
provide, Leigh added. "They're not going to shoot themselves in the foot if they think they can
make more money out of iTunes."
Netflix, for example, has about 100,000 DVDs to rent plus 10,000 movies and TV shows available
via streaming, Scherf said. "For Netflix, streaming makes a lot of sense and is a good value-added
feature," he noted.
"We've been trying to find some pulse in the movie rental business, and what seems to be working
isn't necessarily a stand-alone service but one that layers on top of an existing service," he explained.
Scherf added "I think it's going to allow them to use some analytics. If they can understand
more about what people are watching online, they can better match their premium content."
Amazon has already done a great job of building an analytics-based business. For that reason, a
streaming service could fit nicely with its core DVD sales business as well.
This article was featured on Business 5.0.
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