Now Amazon announces a free video service that compete against Roku

Roku shares sank 4.9 percent on Wednesday on a report that rival Amazon is launching a competing video service thatís free.

The Seattle-based web giant is developing a free, advertising-supported video service for the 48 million people who use its Fire TV streaming video devices, according to The Information, a tech news site.

Amazon, whose shares rose 3.4 percent, to $1,998.10, didnít comment. Roku fell $3.07, to $59.92.

Amazonís service, which reportedly is being developed by its IMDb subsidiary, would compete with Roku and others for a chunk of the $70 billion US advertising business.

KeyBanc Capital Markets analyst Evan Wingren said the TV advertising market is big enough for both companies.

ďAnytime Amazon is making headlines around you, investors tend to get concerned. Competition has always been a bear case for Roku Ö we donít underestimate Amazon,Ē he said.

ďBut the market for streaming advertising is growing. Roku and Amazon are looking to create a lot of inventory for advertisers.Ē

Such ad inventory is based on data collected from the companies to target consumers. In the past year, Rokuís advertising business has been in the $200 million ballpark, the analyst said, as more consumers opt for TV streaming versus pay-TV.