The King Of The Jungle Is Going After The Cheetah

What some thought was just a "hobby" as Steve Jobs likes to call Apple AAPL TV, Amazon AMZN announced this morning that it is going after Netflix NFLX by reaching a deal with CBS CBS to stream thousands of the CBS television shows online. The deal is non-exclusive with CBS, but it will allow Amazon Prime users to stream 2,000 episodes of CBS shows at no additional costs for Amazon Prime subscribers. Late last year, Amazon announced that those who have Amazon Prime, a service that allows users to have free 2 day shipping for a price of $79 per year, will be able to view thousands of movies and TV shows at no extra cost. The problem was that some of the offerings were not the best quality in terms of content, but this CBS deal is huge, as it will expand the Amazon library to more than 8,000 pieces of content. Netflix NFLX by comparison, as more than 20,000 movies and TV shows online. The online digital distribution space has been incredibly hot, with the continued out-performance of Netflix and the potential sale of Hulu, a Los Angeles-based Web service that streams TV shows. Hulu is joined owned by Walt Disney Co. DIS, News Corp. NWSA and Comcast Corp. CMCSA's NBC Universal. As part of the sale, Hulu is offering suitors five years of access to shows, including two years of exclusivity. Netflix shares are getting hit hard on this deal, down 2.5% as of the time of this writing. Shares had touched $300 earlier in the month, but have since come off sharply from that level. Netflix has its own two-year, non-exclusive licensing agreement with CBS, which was announced in February. As the gorilla in the space, there will always be competitors gunning for you, and Reed Hastings and company know this. Amazon has a market cap of $97 billion compared to Netflix's $15 billion. It has considerably more muscle to throw behind this venture if it should choose to do so. It looks like this is happening, slowly but surely. Amazon, like Apple AAPL is one of those companies that everything it touches turns to gold. The Kindle. Online ordering. Digital downloads. Warehouse distribution. Customer service. Amazon does it all, and does it well. Jeff Bezos is a genius and if he wants to go after Hastings and take market share from Netflix, he will do it eventually. ACTION ITEMS:

Bullish:
Traders who believe that Amazon will continue to do well in online video might want to consider the following trades:

• Go long Amazon AMZN, as it has more resources than Netflix. This is a bullish move for the company.

• Initiate a position in CBS, which just continues to find new ways to generate revenues from exisiting and old content. Les Moonves has done an excellent job of monetizing old assets.

Bearish:
Traders who believe that Amazon will over take Netflix may consider alternate positions:

• Short Netflix. The stock topped out at $300 and since come ~10% off those levels. The move to raise prices for its DVD services has a lot of consumers up in arms about the price hike.

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