LOS ANGELES — Amazon.com Inc. is busy stocking its
shelves with more programming and will soon offer streams of older
CBS-owned television shows, including “Frasier,” “Cheers” and “Star
Trek,” to its online customers.
The move, announced Wednesday, represents the online
retail giant’s most significant licensing agreement since launching its
Amazon Prime subscription service in February to compete with Netflix.
Seattle-based Amazon is eager to become a bigger
player in the online programming field, and is seen as a possible buyer
of the popular video website Hulu. The owners of Hulu — which include
Walt Disney Co., News Corp. and Comcast Corp.’s NBCUniversal — are
looking to sell the service while the market for Internet properties is
hot. Amazon would represent a viable competitor to some of the online
leaders, including Netflix and Google Inc.
Google, which owns dominant online video site YouTube, is among a group of potential bidders for Hulu.
Financial terms and the length of the Amazon-CBS deal
were not disclosed. Analysts believe the arrangement spans 18 months to
two years.
Marci Ryvicker, a media analyst with Wells Fargo
Securities, estimated that the Amazon deal would bring CBS more than
$100 million in revenue over the life of the agreement.
CBS has firmly held on to the rights of its current
series, so episodes of its popular “NCIS” and “Hawaii Five-0” are not
part of the pact. This year, CBS negotiated a larger licensing deal with
Netflix. Analysts estimate the value of the CBS-Netflix deal at $200
million over two years.
Wednesday’s transaction allows Amazon to offer some of the same shows that Netflix provides.
“We believe that this agreement is structured
slightly differently than the Netflix deal,” Ryvicker wrote in a report
Wednesday morning. “It is a smaller percent of CBS’ library; is shorter
term and likely has some sort of per-subscriber structure in addition to
an upfront payment.
“These differences make a lot of sense to us given
that Amazon is still in a ‘build-out’ phase when it comes to its
streaming TV offering.”
Beginning next month, customers who subscribe to the
Amazon Prime streaming service will have access to episodes of 18 TV
series owned by CBS, including Showtime’s “The Tudors,” and the complete
“Star Trek” franchise. Customers pay a flat $79 a year to subscribe to
Amazon’s streaming video service, a price that also includes free
two-day shipping for many products bought on the site.
With the deal, Amazon will have more than 8,000
movies and television episodes available through its Prime service plan.
That’s still significantly less than the estimated 20,000-plus
available from Netflix, which doesn’t disclose the exact number.
Later this summer, dozens of CBS shows also will be
made available to Amazon’s Instant Video service, in which viewers can
pay about $1.99 to order a stream of a single episode.
CBS shares closed up nearly 3 percent to $28.74 a share. Amazon shares slipped 1.2 percent to $215.55.
Wall Street appears slightly concerned about Amazon’s
upcoming expenditures as it amasses entertainment content that could be
viewed on a variety of devices, including the online bookseller’s
anticipated competitor to Apple Inc.’s iPad.
“Amazon can potentially succeed in streaming, but not
without material startup losses,” Barclays Capital media analyst
Anthony DiClemente said in a report. “Streaming media is likely to weigh
on Amazon margins.”
DiClemente pointed out that Amazon could be paying
higher licensing fees than Netflix to secure less content. “We believe,
however, that a content strategy is necessary for Amazon’s tablet,” he
said.
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