Amazon has denied that it is approaching partners to create a streaming online video service that would compete with Netflix, following a report in the Wall Street Journal. But some say that the company could be considering a hybrid approach that would add streaming to its existing Prime Instant video on demand (VOD).

The WSJ cited sources close to the company as saying that the e-tailer is considering an advertising-supported streaming television and music-video service, which would be a separate initiative from its $99-a-year Prime on-demand offering. The report noted that Amazon has held talks with the creators of "Betas," the company’s original series about a Silicon Valley startup to partially populate the service.

But, Amazon was quick to shoot down the rumor, with an Amazon spokeswoman saying, "We're often experimenting with new things, but we have no plans to offer a free streaming media service."

The report is the second one that Amazon has denied; earlier in the year, the WSJ reported that the company was Amazon looking to build a service would actually mimic that of a traditional, linear-programming-centric cable or satellite subscription, although it has not settled on an exact business model. The service would be developed in tandem with Amazon’s development of its own set-top box (STB) that would take on Roku or Apple (News - Alert) TV as a streaming video platform.

Amazon issued a denial in that case as well, “We continue to build selection for Prime Instant Video and create original shows at Amazon Studios, but we are not planning to license television channels or offer a pay-TV service,” it said.

Motley Food contributor Adrian Campos said that Amazon’s resolve is likely true in this case, considering that any move to introduce a separate streaming option would cannibalize Amazon Prime subscriptions.

“Instead, the company could adopt a different strategy, one that involves improving the competitiveness of Amazon Prime by creating original content, releasing complementary services or changing the pricing system,” Campos wrote. “The adoption of a hybrid model, which allows price-sensitive customers to enjoy a lower membership fee in exchange for watching ads, is also worth considering.”

A combination between the current version of Amazon Prime and a completely ad-supported, free streaming service would help Amazon to gain price-sensitive customers, and the company could experiment with reducing the membership cost of Amazon Prime in exchange for in-stream advertising.

“Note that Amazon has used this model in the past,” Campos said. “The Kindle ‘with special offers’ edition offered customers a discounted price on the hardware in exchange for advertising on Kindle's home screen.”

Amazon has an economic incentive to mull a move like that: It already offers a wealth of on-demand online video content, both library films and TV, current-season television episodes and original content that it has developed itself. Amazon invested about $1 billion in content in 2013, according to Cantor Fitzgerald—and could be looking to monetize that in various ways.