Amazon Monthly Prime Option Steps Up Challenge to Netflix

Amazon.com Inc. (AMZN) started a monthly subscription option for Amazon Prime, a service for shipping and streaming video, a move designed to entice holiday shoppers and step up competition with Netflix Inc. (NFLX)

Prime subscriptions, which have cost at $79 a year, can now be bought for $7.99 month, according to pricing information on the website of the Seattle-based company.

Free two-day shipping may help Amazon, the world’s largest online retailer, encourage consumers to make more holiday gift purchases on its website. The new payment option also intensifies a rivalry with Netflix, which charges the same price for monthly subscriptions to its streaming video service.

“Holiday shopping is extremely important for Amazon,” Sean Kim, an analyst at RBC Capital Markets in New York, said in an interview. “Anything that can get more users to the website and use Prime is a going to drive more sales.”

Amazon shares advanced 1.4 percent to $237.56 at the close in New York, while Netflix retreated 2.4 percent to $76.37.

In September, Amazon reached a deal with pay-television channel Epix to offer films such as “The Hunger Games” on its Prime service. The multiyear agreement increased the number of titles available through Prime to 25,000, Amazon said at the time.

While Netflix has more movies and television shows, the added benefit of free shipping may lead some customers to try Amazon as an alternative, Kim said.

“For $7.99 on Amazon, you’re getting less video but you’re getting all this other stuff,” Kim said.

Pia Arthur, an Amazon spokeswoman, said the company is testing the monthly subscription service, while declining to comment further. Joris Evers, a spokesman for Los Gatos, California-based Netflix, didn’t respond to requests for comment.

To contact the reporters on this story: Lisa Rapaport in New York at lrapaport1@bloomberg.net; Ryan Faughnder in New York at rfaughnder@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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