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Netflix: Amazon Losing $1B A Year in Streaming War

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.

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  • Its simple

    Who has more money?

    Goodbye Netflix!
    Reply
  • kawininjazx
    Having a Netflix and Hulu account, I don't find anything good to watch on Amazon for Prime TV and Videos. However, I will occasionally rent a movie off Instant Video. The nice thing is, I can rent a movie for a dollar cheaper and it still looks great, even though it's not "HD".
    Reply
  • waxdart
    If your ISP has a cap then of course you'll get hit with a bill. In the UK you can get uncapped accounts so you must be able to get that in the US. The netflix selection is a bit crappy here; but it still has some good bits.
    Reply
  • neiroatopelcc
    otacon72The only way Netflix survives is if ISPs uncap their bandwidth which is never going to happen. All this streaming is all fun and dandy until you get a letter from your ISP saying you exceeded your bandwidth for the month. Several of my friends have already dropped Netflix all together after getting huge data bills. I read somewhere a while ago that L3 was going to start charging Comcast more because of the all the bandwidth Netflix users were sucking up. What is it 40% of all internet bandwidth is being used by Netflix? They should pay more.
    Dunno about the rest of Europe but here in Denmark Netflix is doing great - I'm not aware of any non torrent related traffic being throttled and since several of the country's electricity suppliers these days supply fiber based internet to homes, we're not really in a position where throttling would cause Netflix not to work.
    Reply
  • neiroatopelcc
    waxdartIf your ISP has a cap then of course you'll get hit with a bill. In the UK you can get uncapped accounts so you must be able to get that in the US. The netflix selection is a bit crappy here; but it still has some good bits.use a vpn connection to a us system to circumvent that - that's what I do when I want to watch channel4 or use the iplayer from bbc
    Reply
  • upgrade_1977
    I didn't even know Amazon streamed.. I'll stick with Netflix's service. Even though there library is limited I still like how the service works. I much prefer paying a monthly fee and getting the whole library at my disposal versus paying for each purchase.
    Reply
  • rosen380
    "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."

    23M x $7.99 = $2.2B, so it doesn't look like Netflix is rolling in cash from streaming either...
    Reply
  • The problem with Amazon Prime streaming is that the resolution sucks. Compared to Netflix streaming, which is mostly in HD (720p, which looks great even on my 1080p screen), Amazon is blurry. I try it about twice a year and then forget about it for six months because it is so low-res.
    Reply
  • spookyman
    Amazon's Prime site is kind of hard to navigate around. Netflix has nothing worth watching.
    Reply
  • Ninjamonkeh
    rosen380"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."23M x $7.99 = $2.2B, so it doesn't look like Netflix is rolling in cash from streaming either... 2.1 billion over 12months, your math showed what they are making in a month verses spending in a year
    Reply