Amazon Signs New Streaming Deal with Epix; Could Hurt Netflix
October 9, 2012 4:47 PM
Epix will provide Amazon with about 3,000 more movies to the Prime Instant Video catalogue
Amazon is shelling out a considerable amount of cash to make sure its Prime Instant Video Service continues to stay competitive with Netflix via
a new contract with Epix
Amazon is shaking up the pricing model for licensing agreements with movie/TV studios. It recently agreed to pay Epix -- a partnership between Metro-Goldwyn-Mayer, Lionsgate and Paramount Pictures -- an earn-out provision if the number of Amazon Prime Instant Video subscribers increases above a certain point. This payment will be dished out over time as subscribers grow, and is in addition to the usual fixed upfront fee.
Generally, services like Netflix only agree to a fixed upfront fee with movie/TV studios when it comes to content licensing. However, studios realized that they want to be in on any future growth that may occur with video streaming services.
Epix isn't the only one who will benefit from such a deal model. Amazon has now given studios a reason to want to do business with them instead of bigger services like Netflix. As of now, Netflix has about 25 million subscribers in the United States while Amazon Prime Instant Video has about 3-4 million. Also, Amazon Prime Instant Video only has about 25,000 titles to offer while Netflix has double that. In other words: Amazon could really use the boost.
Epix will provide Amazon with about 3,000 more movies to the Prime Instant Video catalogue. Epix previously had a contract with Netflix for $200 million a year, but once that agreement ended, Amazon snuck in with the new deal.
Amazon really needs deals such as the one with Epix in order to boost its profit margins where
the Kindle Fire
is concerned, too. Amazon is selling the Fire at a discount with hopes that customers will use it to consume books, TV, movies and shopping through the e-tailer's services -- which makes up for the loss on selling the device at $199.
Since 2011, Amazon has announced new streaming deals with companies like NBCUniversal and ABC.
Amazon and Epix
announced their agreement last month
, but the pricing model details were just recently released.
"We are going to continue to work with them to make sure they understand the reality of the Internet. A lot of these people don't have Ph.Ds, and they don't have a degree in computer science." -- RIM co-CEO Michael Lazaridis
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