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Netflix, Epix Officially Bow Streaming Deal

10 Aug, 2010 By: Erik Gruenwedel

As expected, Netflix and Epix, the pay-TV channel co-owned by Lionsgate, Paramount and Metro-Goldwyn-Mayer (MGM), Aug. 10 formally confirmed speculation Netflix would have streaming access to the studios’ new-release and catalog titles, beginning Sept. 1.

Financial terms of the multiyear agreement were not disclosed, although reports suggest the deal is worth more than $1 billion in license fees to Epix over the course of the five-year contract.

Specifically, Netflix, which continues to add to its online DVD rental subscriber base of 15 million with the addition of streaming to the television via Internet-connected video game platforms, media players and Blu-ray Disc players, will have rights to the content 90 days after the pay-TV and subscription video-on-demand (VOD) debuts.

Netflix typically didn’t have access to the content for up to nine years after release, according to the Los Gatos, Calif.-based service.

“The Epix deal is an example of the innovative ways in which we’re partnering with major content providers to broaden the scope and freshness of choices available to our members to watch instantly over the Internet,” said Ted Sarandos, chief content officer for Netflix.

Eric Wold, analyst with Merriman Curhan Ford in New York, applauded the deal as “extremely” attractive to consumers willing to wait three months for new release movies. Specifically, Wold envisions Netflix implementing new pricing tiers to give subscribers access to specific content for an incremental monthly fee on top of the normal subscription fee similar to the premium charged for Blu-ray titles.

The analyst added the Epix deal will help reduce churn (subscribers who cancel) and increase retention even further.

“Do we believe consumers would completely substitute Netflix delayed streaming for real-time [VOD] purchases? Absolutely not,” Wold wrote in a note. “However, we do see it potentially pressuring some a la carte purchase decisions that may otherwise have gone to Apple’s iTunes or Sonic Solutions’ RoxioNow.”

The latter is a key driver to third-party retailers and consumer electronics companies rolling out transactional VOD services, including Best Buy’s CinemaNow, Sears and Kmart’s Alphaline Entertainment and Blockbuster On Demand, among others.

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