Netflix: Amazon Losing $1B A Year in Streaming War
Amazon is spending tons of money to stockpile its arsenal against Netflix and Hulu.
AllThingsD reports that Netflix CEO Reed Hastings doesn't consider Amazon a threat – at least, not right now. The online retailer is reportedly losing between $500 million and $1 billion a year as it acquires streaming video content rights for its Prime Instant Videos streaming service.
As it stands now, Amazon offers two forms of video streaming: Instant Videos and Prime Instant Videos. The former allows customers to purchase or rent movies and television episodes, and then stream the content to compatible devices. Consumers can also download their purchases without streaming if the device is registered with Amazon (Unbox on PC).
The latter service – Prime Instant Videos -- is part of Amazon's Prime yearly membership, and offers content that can't be accessed by non-members. It's here where the company is really stockpiling its arsenal against Netflix, signing licenses with EPIX, NBCUniversal, Warner Bros., MGM and more in recent months. The company is even generating its own content, following in its competitors' footsteps.
But let's be honest here: Amazon will never be a threat to Netflix if it continues to limit its streaming service to a limited number of devices, no matter what's in its library. Amazon recently branched out and launched an Instant Video app for the iPad back in August, but Amazon's preferred platform, Android, still doesn't have means of accessing Amazon's content outside the Kindle Fire family.
Hastings told AllThingsD on Friday that he generated Amazon's $1 billion per-year loss based on "the value of the content deals that Amazon won when the two companies competed head to head." He believes Amazon's costs are split between its local streaming service here in the States, and the European version Lovefilm overseas.
Netflix said last month that it was currently on track to spend around $2.1 billion on content over the next twelve months. Netflix charges $7.99 USD per month for its video streaming service, and as of March 2012, the company has over 23 million subscribers. The company also reportedly accounts for 33-percent of the peak period traffic in the United States.