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Amazon streams free movies to Prime members

The online retailer will comp Prime members video-streaming access to 5,000 movies. This is just one of the ways Amazon can challenge Netflix.

Amazon said today that it is offering Amazon Prime members free, instant streaming of more than 5,000 movies and TV shows.

In a press release, the company said the feature will be offered at no additional cost above the $79 that Prime members already pay annually. The movies and TV shows can be watched instantly on Macs, PCs, and nearly 200 models of Internet-connected devices, Amazon said. Amazon Prime is a membership program that offers customers free two-day shipping.

Some of the movies and TV shows that Amazon will stream include "The Girl with the Dragon Tattoo," "Syriana," "Doctor Who," and "Farscape."

Dan Rayburn, an analyst covering Web video for consulting firm Frost & Sullivan, gets the shout-out for calling this one early. Three weeks ago, Rayburn told CNET that Amazon has the money and audience to stimulate interest in a video service by, say, streaming movies for free to Amazon Prime members.

"Millions of Amazon Prime members already enjoy the convenience of free Two-Day Shipping," Robbie Schwietzer, vice president of Amazon Prime, said in a statement. "Adding unlimited instant access to thousands of movies and TV shows at no additional cost is a great way to give members even more value."

Hulu, Netflix, Apple and Google are just some of the companies competing in the online movie distribution market. Rayburn is a big believer that Amazon is one of the companies best positioned to take on Netflix, the Web's top movie rental service. With this offering, Amazon beats Netflix and Hulu on price--both charge $7.99 subscription streaming-only subscription fees--and because Amazon doesn't force commercials on Prime members, it's providing a better viewing experience than Hulu.

In midday trading following Amazon's announcement, Netflix shares were down $10 or 4 percent to $224.

Can Amazon take down Netflix? Click the photo to read the story. Screenshot by Greg Sandoval/CNET

Amazon was once the Web's top source of DVDs and CDs and has since seen the market recreated when iTunes began selling song downloads and Netflix started streaming video.

But Amazon still enjoys a large and loyal following--more than 65 million visitors log on to the company's site each month. With this kind of audience and Amazon's deep pockets, Rayburn said Amazon could also conceivably give away a Roku-like box or some other dedicated device to enable Prime members to watch streaming Amazon video on their TVs.

But how Amazon fares in acquiring content will be interesting to see. Some in Hollywood see the current crop of Internet providers as a threat. Executives from some of the top film companies and media conglomerates have complained that Netflix's streaming service isn't a profitable-enough channel and competes with distribution partners that generate more cash for content creators. Amazon does, however, have a relationship with the studios going back over a decade, when the company used to be a large distributor of DVDs.