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Amazon reportedly developing a new weapon to combat Netflix

Amazon Free Video Streaming Service

In order to better compete against rivals like Netflix, Amazon may launch a free, ad-supported streaming video service at some point early next year, The New York Post has learned.

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Not many details about the new service are available at this time, and it’s not known what Amazon will call it, but it’ll apparently be available for free and will not be tethered to Amazon Prime, which already offers unlimited video streaming to subscribers.

“If they do an ad-supported service, they will decouple it from Prime and that is a Netflix killer,” Wedbush Securities analyst Michael Pachter said. “It won’t be $99 a year. Who wouldn’t switch if you were poor or you’re a cord-cutter?”

One source familiar with Amazon’s plans said the retailer wants customers who initially choose the new free streaming option to then convert to Amazon Prime, a subscription that costs $99 per year. At the same time, Amazon also wants to increase its video streaming share, as it’s competing against other popular services such as Netflix and Hulu.

“The main point is to bring in more users that you can eventually up-sell to Prime, or to get to a broader audience that doesn’t want to pay for Prime, in order to increase their video share,” the source said.

Amazon is estimated to have some 50 million global Prime members, of which roughly 25 million use the video service included in the subscription.

However, Amazon only has a 2.58% share of broadband traffic, compared to Netflix’s 32.39% share of aggregate traffic. Netflix currently has 33 million subscribers in the U.S.

In addition to video streaming, Amazon could also benefit from targeted advertising, as it would be able to tell whether customers actually purchase products on after viewing ads for them while streaming TV shows.