Reports recently claimed Amazon is preparing to launch an ad-supported Instant Video service, offering most of the current TV shows for free, with ads at the start and in the middle of the TV show.

The ads would ideally annoy users into subscribing to Instant Video, while also boosting Amazon peak Internet traffic to compete with Netflix.

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In a reply to rumors, Amazon has denied an ad-supported Instant Video service is on the way. This is not the first time Amazon has denied rumors on the ad-supported service, denying its existence earlier this year.

Netflix currently dominates the peak Internet traffic in the U.S. with 34 percent share, while Instant Video only has 2.5 percent share. Facebook and YouTube surpass Instant Video, with 3 percent and 14 percent, respectively.

Amazon Instant Video is available on its own or in the $99 per year Prime package. Prime is a big part of Amazon's e-commerce push, offering almost all of its services inside the yearly payment, alongside faster delivery.

It has always been the underdog to Netflix, first due to the library of films and TV shows Netflix managed to grab, and second due to the impressive original programming Netflix has put out over 2013 and 2014.

The large increase in subscribers is partly due to House of Cards and Orange is the New Black not being available anywhere else. Similar to HBO and other networks, Netflix has become a prime time option when it comes to TV shows and movies.

Amazon has not released subscription numbers for Instant Video, but it is expected to be a quarter of Netflix's 35 million subscribers. The ad-supported option might work well for Amazon to make Instant Video a true competitor.

Amazon already offers ad-supported first episode on Instant Video, letting the viewer get a taste of a TV show, before paying for a subscription.

TagsAmazon, Amazon Instant Video, Amazon Prime, advertizing