Amazon on Tuesday added unlimited streaming of movies and TV shows to its Prime subscription plan. While the move is billed as Amazon vs. Netflix the move really just highlights what's possible with the Prime model.
First, the basics. Amazon Prime runs you $79 a year and now you get unlimited streaming to go with free two day shipping. On the surface, Amazon is taking target practice at Netflix. Netflix's streaming only service runs you $7.99 a month. All things being equal, Amazon just undercut Netflix's pricing.
There's little doubt that Amazon is looking to hit Netflix. However, there is a bigger picture. Remember the Prime program is designed to get you to shop more and allow Amazon to grow its wallet share.
When shipping is removed as a barrier, shoppers spend more dough. Amazon rivals clearly see the threat from Prime. As a result, a bevy of competitors such as Toys R Us, Drugstore.com and others have joined Shoprunner, which offers free shipping and deals via participating stores. Shoprunner is a unit of GSI Commerce, which competes with Amazon on the fulfillment side of the e-commerce equation.
GSI handles the fulfillment for companies like Toys R Us and Dicks Sporting Goods. Incidentally, Shoprunner's annual fee is $79 too.
In its initial incarnation, Prime was easy to replicate by GSI Commerce's Shoprunner. Now Amazon has thrown in video the equation has changed again. Simply put, Amazon is playing a little offense and defense with its Prime program.
Streaming movies are likely to be just a start. Amazon could provide free Kindles to all Prime subscribers. Perhaps Amazon offers Web backup services via Amazon Web Services. You get the idea. Amazon could offer a lot of goodies to Prime subscribers---and probably will.