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Amazon targets Netflix with standalone video sub

Brett Molina
USA TODAY

Amazon has made a big move in the video streaming space, rolling out a price plan that's a buck cheaper than rival Netflix's.

Amazon will start selling more private label grocery products.

Starting Monday, the retailing giant will allow consumers to subscribe to its Video service on a standalone basis. The streaming service remains available to members of Amazon Prime, the annual subscription offering free shipping and other perks.

The standalone plan costs $8.99 a month, $1 below Netflix's standard plan of $9.99. Netflix also offers a basic $7.99-a-month plan, but it does not include access to high-definition content.

The move by Amazon raises the stakes in its battle with Netflix, which boasts popular series including House of CardsOrange is the New Black, and Marvel's Daredevil. Netflix also reached a multi-year deal with Disney to host the studio's movies shortly after they leave theaters.

Amazon counters with its own successful programs such as Transparent, which snagged five Emmy wins last year. Amazon also has a deal with HBO to showcase the channel's older series including The Wire and The Sopranos.

Amazon's move represents a "significant negative development" for Netflix, says Mark Mahaney, analyst with RBC Capital Markets. Along with a lower price point, Amazon will offer access to 4K content, while Netflix offers Ultra HD programming through its $11.99 Premium plan. Mahaney says both factors could place pressure on Netflix to convert subscribers to pricier plans.

"Amazon certainly has the brand name, the customer relationships, and the focus on high-quality consumer experiences to impact the growth in Netflix’s U.S. subscriber base, and perhaps eventually its global subscriber base," he says.

Amazon launched the monthly plan the same day as Netflix's late Monday quarterly earnings announcement, when Wall Street was expected to be laser-focused on how a price rise will affect older grandfathered customers. Starting in May, grandfathered Netflix customers will start to see their subscription for HD service rise to $9.99 from $7.99.

Shares of Amazon (AMZN) rose 1.5% to $635.35. Netflix (NFLX) shares lost nearly 3% to $108.40 in Monday's regular session, and sank further following after-hour results that included a weaker-than-anticipated outlook for subscriber growth.

Netflix shares dive on subscriber growth forecast

PRIME MONTHLY Amazon is also expected to offer Prime to consumers on a monthly basis. The plan costs $10.99 a month, and provides full benefits including Video, free shipping, and access to its streaming music service.

Users can currently subscribe to Amazon Prime for $99 a year. Users who subscribe to just the monthly Video package would pay nearly $108 a year, while consumers opting to pay for Prime month to month will pay roughly $132 a year.

Details of the plans were first reported by The Wall Street Journal and New York Times.

Follow Brett Molina on Twitter: @brettmolina23.

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