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Report: Amazon Sweetened Epix License Deal

10 Oct, 2012 By: Erik Gruenwedel

When Amazon in September signed a streaming agreement with Epix – an arrangement previously exclusive to Netflix – consensus was that the ecommerce behemoth had finally stepped up to the plate regarding content licensing.

Now, a Reuters report – citing analysts and executives familiar with the negotiation – says Amazon did so and more. And in the process it potentially raised the bar for future subscription video-on-demand content license deals by agreeing to pay Epix additional monies should its subscriber base increase above certain benchmarks.

Epix, a pay TV platform co-owned by Lionsgate, MGM and Paramount Pictures, apparently structured the deal (that included 3,000 movies) so that should Amazon Prime Instant Video grow its subscriber base incrementally going forward it would benefit additionally.

Amazon Prime is a $79 annual shipping program that also offers free streaming to registered members. Although Amazon has not disclosed the number of Prime subs (or Instant Video members), reports suggest the latter to tally from 3 to 4 million. Netflix reported nearly 24 million streaming-only subs in the United States during its most recent fiscal report.

“This could be considered online video deals 2.0,” Goldman Sachs media analyst Drew Borst told Reuters. “After doing 1.0 deals, mostly with Netflix and a few with Amazon, it dawned on the media companies that they may want to get a piece of any future growth too.”

SVOD license deals have fattened the bottom line of several media companies, notably CBS, Viacom and Time Warner, with Netflix spending billions securing rights of increasingly more relevant content. For example, Netflix earlier this year signed an exclusive deal with DreamWorks Animation, on top of similar deals it has with The Weinstein Co. and Relativity Media.

“Hollywood loves it because they can say Amazon is paying us X and we want more from you,” said Michael Pachter, analyst with Wedbush Securities in Los Angeles. “It's a club they can use to beat Netflix over the head.”

Indeed, Pachter believes increased competition from Amazon Prime Instant Video and Hulu Plus will deny Netflix from reaching its year-end goal of 7 million new streaming subs in the U.S. He expects Netflix to downsize sub growth from 1 - 1.5 million when it reports third quarter financials Oct. 23.


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