Amazon offers free online movies to Prime members

People who subscribe to Amazon.com's premium membership will now be able to watch movies over the Internet, just as they can through Netflix.

The Prime membership, which costs $79 per year, entitles people to free two-day shipping and low-cost next-day shipping. Now, subscribers can also watch roughly 5,000 movies and television shows through Amazon.com Inc.'s on-demand video service.

People can watch these movies on PCs and Macs, or with the help of about 200 Internet-connected TVs, set-top boxes and Blu-ray players.

The move could undercut Netflix Inc., which offers a streaming-only service for $7.99 per month, or about $96 per year. Netflix says its library includes "thousands" of titles.

Netflix shares fell $11.77, or 5 percent, to $223.74 in midday trading Tuesday. Amazon lost $3.38, or 1.8 percent, to $183.12.