June 3, 2008

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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 Intelligence.

"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.

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Source: Amazon.com.

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