Amazon is developing a film streaming service that would see it compete directly with firms such as Netflix, according to industry sources.
It is understood Amazon is planning to bundle access to the streaming service with Amazon Prime, a scheme that guarantees Amazon customers unlimited free next-day shipping of books and other items sold by the online retailer after paying an initial fee of £50 a year.
A leaked promotion for the service suggested movies would be free for Amazon Prime customers.
The on-demand TV market is becoming increasingly competitive, with internet giant Google ready to launch a new service, Apple recently upgrading its Apple TV offering and firms such as US-based Hulu becoming increasingly popular.
Internet-ready TVs are also coming to the forefront of the industry, with firms including Sony, Samsung and Panasonic all unveiling new models earlier this year.
The move follows Amazon’s £200m acquisition of DVD rental and streaming firm LoveFilm last month. Amazon already owned 42 per cent of the firm but took direct control in a move that was welcomed by analysts, who say Amazon is in an ideal position to grow the business.