Will Amazon streaming hurt Netflix?

The online retail giant's incursion into streaming video might not disrupt Netflix's dominance, but it might take a toll on its share price. With video commentary.

By Jim Cramer Feb 24, 2011 10:35AM

jim cramerAm I worried about Amazon's(AMZN) incursion into the world of Netflix(NFLX)? You bet I am. But not because Amazon has a good collection of films and TV shows. And not because its library could one day rival Netflix's. I bet it won't.

 

I worry because Amazon doesn't have to charge for the service. Amazon is making it a "premium" for subscribing to Amazon Prime. When you give something away that others charge for, it is always going to be a problem.

 

Mind you, I am not worried about the dominance of Netflix; I am worried about the multiple of Netflix's stock. You need smooth sailing to stay on the Netflix horse. You need to have no real competitors of consequence. That's why I was never worried about Coinstar(CSTR).

 

But I am always worried about Amazon's encroachment. I even asked the CEO of Federal Realty(FRT), Don Wood, about the indirect power of Amazon to hurt retail tenants and their ability to pay rents.

 

Post continues after video:

 

 

So there's no way I can't worry about Amazon's competition and its impact on what we will pay for the future of Netflix's earnings.

 

I say let the stock come in. Let it come in. It's up huge. You have a profit in some? Take it.

 

You can buy it later.

 

Nothing ever wrong with that.

Random musings:Libya has changed everything. I reiterate that the best opportunities are the ones where energy and commodity plays are hammered below the 10% to 15% threshold as if they are consumer discretionary stocks -- something that happens because of the commoditization of the stock market via futures. I remain indifferent toward everything else, as the setting is too grim to be opportunistic without further declines.

 

At the time of publication, Cramer had no positions in the stocks mentioned.

 

Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.

 

Follow Cramer's trades for his charitable trust.

 

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