It doesn't hurt #2 because, at least in the past, Netflix was actually cheaper than prime. It's still cheaper month-to-month.
Moreover, due to copyright and the existing streaming deals, any new companies trying to enter the online market will be selling a different product package. They'll have different shows, essentially selling a different service. It's not as if PBS or FoodNetwork have been "dumping" their video streaming services as a detriment to Netflix.