Amazon is to combine its high-speed shipping subscription with its Lovefilm streaming service to create Prime Instant Video, while also increasing its investment in original content.
The merger will come at a cost to current customers of the Prime service, as subscription prices are hiked by £30 to £79 per year.
By combining the two services and rebranding Lovefilm Instant, the online retailer is bringing its UK video-on-demand offering in line with its US service.
"Consumers will be able to shop for what they want, read what they want and watch they want anywhere at any time," said Tim Leslie, Amazon-vice president of instant video for the UK and Germany.
Lovefilm was bought by Amazon in 2011 having been founded in 2002 as an online DVD rental company.
Within a year of Amazon taking control, more content was viewed via the instant streaming service than DVD rentals.
The Lovefilm brand will continue to be used as a DVD and book rental venue in the UK.
Already the biggest rival to Netflix in the UK, Amazon's online streaming service is hoping to offer an even broader service than its competitor with exclusive content and original programming.
Plans include acquiring new releases like television hit Game of Thrones, The Girl with the Dragon Tattoo and One Direction: This Is Us.
"Even if you have another service you are going to want our service," Leslie added.
"It is the only place you are going to be able to find certain great TV shows, movies and original content all in one place. It is the most complete digital video service in the UK."