12,000 Reasons for Netflix to Take Amazon Seriously

You may never have to sit through another PBS pledge drive again.

Amazon.com (Nasdsaq: AMZN) has expanded its streaming relationship with PBS, now offering 1,000 episodes of hit shows including NOVA, Antiques Roadshow, Julia Child's The French Chef, and Ken Burns' award-winning documentaries.

The move pushes Amazon's digital catalog of titles available -- at no additional cost to Amazon Prime members -- to 12,000 selections.

Yes, customers already paying Amazon $79 a year for free two-day shipping on all Amazon-stocked wares now have another reason to start streaming through their computers and a growing number of TV-tethered boxes. Amazon's library will probably always pale in comparison to that of Netflix (NAS: NFLX) , but only one of those two companies still isn't charging more for streaming video -- and it's not Netflix.

The PBS deal includes archived and select current content, unlike most of the Netflix television content deals, which are typically limited to prior seasons.

There is definitely a market out there for streaming smorgasbords. Netflix alone has roughly 9.8 million streaming customers -- and another 12 million paying to both stream and receive optical discs by mail. Netflix also has at least another million streaming customers outside of the United States. In other words, Amazon only needs to take a little bite out of this market to be successful.

What's in it for Amazon? Surely there has to be a reason it's undercutting Netflix on price and dabbling in the unlimited model that Apple (NAS: AAPL) and Wal-Mart's (NYS: WMT) Vudu have been steering clear of.

Standing out in a crowd
Is Amazon nuts or does it see something that the competition clearly does not?

I'm in the "Bezos is brilliant" camp. Amazon Prime obviously isn't being built out as a profit center. It's a hook. Amazon has a big enough model that it can use "free" streams to drive the rest of its businesses higher.

  • Streaming encourages couch potatoes to hook up their televisions to Amazon's digital storefront. Unlike Netflix, Amazon actually offers the hottest releases as premium rentals and purchased downloads.

  • The promise of 12,000 titles at no additional cost encourages participation in Amazon Prime, the customer loyalty program that finds paying members leaning on Amazon.com for as many of their online purchases as possible.

  • Kindle Fire hits the market next month, and even today's press release plays up the fact that owners of the $199 tablet will be able to take advantage of Amazon Prime streaming. Even those who aren't already members of Prime will get a free month to stream away.

So Amazon knows exactly what it's doing. Who needs a PBS pledge drive when you have so many hooks in the water?

If you want to follow this saga, track the latest news by addingNetflixandAmazon.comto My Watchlist.

At the time thisarticle was published The Motley Fool owns shares of Apple and Wal-Mart Stores.Motley Fool newsletter serviceshave recommended buying shares of Amazon.com, Apple, Netflix, and Wal-Mart Stores.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Apple, as well as creating a diagonal call position in Wal-Mart Stores. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.Longtime Fool contributor Rick Munarriz has been a Netflix subscriber and shareholder since 2002. He does not own shares in any of the other stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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