Amazon breaks out Prime Video subscriptions in bid to challenge Netflix

Amazon's Prime Video service is getting its own monthly subscription plan.

The online retailer's streaming video platform is now available as a standalone service for $8.99 a month -- a dollar less than the $9.99 a month fee charged by streaming juggernaut Netflix.

The monthly Prime Video option will give customers access to Amazon Prime Instant Video content, minus the free shipping, music, Kindle library and other Prime perks.

Amazon's foray into video streaming began in 2011 with the launch of Prime Video, but until now the service has been bundled into the full Amazon Prime membership.

Over the last two years, Prime Video has amassed an extensive inventory of movies, TV shows and original programming, with shows such as Transparent and Mozart in the Jungle earning awards praise. The growth has been a bragging point for Amazon, and was apparently enough to convince the company that Prime Video could make it on its own.

Meanwhile, Amazon is also offering traditional Prime subscriptions for $10.99 per month as an alternative to the $99 annual plan.

Both options appear easier on the wallet in the short term, but are far more expensive compared to the $99 upfront cost of Prime. Prime Video subscribers will end up paying around $108 annually, while monthly Prime subscribers will pay roughly $132 when all is said and done.

For Amazon, however, the new plans present a clear opportunity for growth.

The new monthly Prime option could help Amazon boost subscription numbers during peak holiday shopping seasons. These short-term subscribers could also decide to stick around for the long term, further increasing Amazon's core base of Prime users.

What's more, the standalone Prime Video service could eventually capture a greater share of the video streaming market and potentially slow Netflix's continued domestic growth.

Here's a research note from financial services firm Wedbush:

We believe that the standalone video offering and the new monthly Prime subscription option reflect increased determination on the part of Amazon to compete, and we expect the company to increase its spending on video content from the current (estimated) $3 - 3.5 billion annually. We believe that Amazon will support its new standalone video subscription offering by spending more on both originals and licensed content, in the process increasing the "fair value" content owners perceive for their licenses. In our view, Amazon's standalone service will have the practical effect of increasing Netflix's content costs; we expect Netflix's costs to rise far faster than its revenues, and expect the company's annual negative free cash flow to grow even more negative as a result