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Is Amazon Thinking Outside the Unbox?

For some time now, Amazon (Nasdaq: AMZN  ) has been rumored to be developing an online video store, which is hardly surprising, given the sheer amount of digital content streaming onto the Web these days. Now, a blog for a leading business magazine, Business 2.0, is reporting what seem to be more specific details of the rumored service.

Dubbed "Unbox," the video service, which is expected to be based on Microsoft's (Nasdaq: MSFT  ) Windows Media Player, will reportedly allow consumers to both rent and buy digital videos, including such movies as Walk the Line and Syriana, as well as NBC's (a division of General Electric's (NYSE: GE  ) ) hit sitcom, The Office.

In part, the timing of the news (which Amazon has not officially released) could be meant to temper reaction from news last week that Lions Gate Film (NYSE: LGF  ) -- a leading producer and distributor of independent movies such as Fahrenheit 9/11 and Crash -- had reached a tentative deal with Apple (Nasdaq: AAPL  ) to distribute full-length feature films via iTunes. If Apple can successfully build on this agreement, it would help cement the company's image as a major media player and could pose more problems down the road for Amazon.

Of course, because the system is still under tight wraps and remains in a testing stage, it's difficult to know how well it works or how customers will react to it. For instance, how long will consumers be able to store the rented videos? Will they be satisfied with Amazon limiting them to use the purchased videos on only two non-portable devices (e.g., laptops or desktop computers)?

More worrisome, however, is how consumers will react to the amount of control Unbox could give Amazon over people's personal computers. For instance, it's believed that Amazon could use the access it gains when downloading a video to flood people's inboxes with unwanted promos or, even more troubling, the power to delete files.

My guess is that Amazon is savvy enough to address the former commercial concerns and smart enough to avoid the latter two privacy-related issues. And if it does, not only will Unbox open up another healthy revenue stream for the Internet pioneer, it will also challenge brick-and-mortar video stores such as Blockbuster (NYSE: BBI  ) , as well as leading online movie rental service NetFlix (Nasdaq: NFLX  ) , to start thinking outside the box about how to adjust their business models to stay relevant in this rapidly evolving arena. Provided Amazon does put its business acumen and e-commerce savvy to use, a new Unbox could be just the thing to lift Amazon's stock from its recent lows.

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Fool contributor Jack Uldrich does not own any stock in the companies mentioned in this article, with the exception of Microsoft. The Fool has a strict disclosure policy.

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