Netflix CEO: Amazon Losing Up to $1 Billion a Year on Streaming Video

Reed Hastings says that, one day, Amazon will provide real competition for Netflix.

But the Netflix CEO says Jeff Bezos will have to spend a lot of money before that happens: Hastings says Amazon is losing between $500 million and a $1 billion a year as it acquires streaming video content rights.

Hastings says he generated those numbers based on the value of the content deals that Amazon won when the two companies competed head to head. He says he thinks Amazon’s costs are split evenly between its U.S. operations and Europe, where it operates the Lovefilm streaming service.

Last month, Netflix said it was on track to spend $2.1 billion on content over the next year.

In the U.S., Amazon rents and sells digital movies and TV shows on a one-off basis via its Amazon Instant Video service. It also offers a large catalog of titles for free to customers who pay $79 a year for its Prime shipping service, and recently began testing an option that lets customers pay $8 a month for Prime; Hastings’s estimate is based on acquisition costs for the Prime/video bundle.

Netflix charges $8 a month for its streaming service.

Hastings made his comments during an interview with Dow Jones editors in New York. Amazon hasn’t responded to a request for comment. Update: Here’s Amazon spokesman Andrew Herdener, via email: “We don’t comment on our individual investments but it’s correct that Prime Instant Video is an amazing value for customers. Not only do Prime members get unlimited streaming video, but they also get free 2-day shipping and the Kindle Owners’ Lending Library as well.”

Last week, a report from broadband service company Sandvine pegged Netflix’s share of Internet traffic at 33 percent, with Amazon at 1.8 percent. But Hastings says he takes the newcomer seriously: “Amazon is the best competitor we’ve ever faced.”