Amazon Prime Pulls Out More Exclusive Content to Fight Netflix

<b class="credit"></b>

Netflix (NFLX) is running away with the video streaming market. A report by Internet traffic researcher Sandvine shows that Netflix is responsible for 34.2 percent of the information superhighway's peak downstream traffic. We're not talking about more than a third of the video streaming market. We're talking about more than a third of all of the Web's downstream traffic.

The only company that's even close is (AMZN). Amazon's Prime Instant -- the video catalog of movies and TV shows that the leading online retailer makes available to its Amazon Prime customers at no additional cost -- is slurping up 1.9 percent of the peak downstream usage.

Amazon added potentially game-changing content this week. And let's not forget about the potential of its new Fire TV.

Content is King

On Wednesday it added content from Time Warner's (TWX) HBO -- entire runs of classic shows including "The Sopranos," "The Wire" and "Six Feet Under," alongside older episodes of current shows, including "Girls" and "Boardwalk Empire."

This is a big score for Amazon, especially since HBO is unlikely to ever let Netflix get its hands on this content. HBO sees Netflix as the enemy. A lot of cable titans do. Striking content licensing deals with Netflix makes it stronger, increasing the chances of subscribers canceling their cable or satellite television plans. This could explain why Viacom (VIA) went with Amazon as a streaming outlet for some of its Nickelodeon and Comedy Central content after its deal with Netflix expired. Making Amazon's content stronger makes it less likely that a single video platform will replace pay TV subscriptions.

Netflix has scored critical praise for "House of Cards" and "Orange Is the New Black," and Amazon is also beefing up its homegrown content. Last year's debut of "Alpha Dogs" and "Betas" were its first forays, but they failed to generate the buzz that Netflix has built for its exclusive programming.

Now Amazon is setting its sights on kid-friendly entertainment with Friday's release of "Tumble Leaf." The animated series is the work of Emmy-winning director Drew Hodges and Bix Pix Entertainment. It's aiming for preschool-aged children. If it doesn't catch on -- or even if it does -- Amazon has two more kid-friendly shows for Prime Instant. "Creative Galaxy," from the folks that made "Blue's Clues" a preschool smash, will follow next month. The live-action "Annedroids" will start streaming in July.

Kids can be finicky, especially when it comes to new shows with new characters. However, we know that once young children are hooked, that they don't mind watching the same episodes again and again. All Amazon needs is a single hit to become an essential service for young families.

Putting Out the Fire

A ton of HBO shows and a new show for preschool kids will enhance the value of Prime Instant, and that's a good thing since the cost recently was increased 24 percent to $99 a year.

%VIRTUAL-article-sponsoredlinks%Amazon will need to improve distribution. Set-top media players, video game consoles and many DVD players come with seamless access to Netflix. Some Blu-ray players even have a Netflix button on the remote. Amazon's doing a good job of getting its video platform into devices, but its boldest move on that front was last month's debut of Fire TV. The $99 set-top player is competing against Google's (GOOG) Chromecast, Roku and Apple (AAPL) TV for attention, but it does place Amazon content front and center.

Amazon has a lot to gain here. Unlike Netflix, which has refused to offer newer movies or current shows on a pay-per-view basis, Amazon offers that content as individual streaming purchases. If Fire TV catches on -- and Amazon has proven with the Kindle and the Kindle Fire that it can price its hardware aggressively -- it will introduce more people into its ecosystem. This week's content additions make Amazon's Prime Instant that much more compelling.

Motley Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends and Netflix. The Motley Fool owns shares of and Netflix. Try any of our newsletter services free for 30 days. ​