It must have been a blow to Netflix (Nasdaq: NFLX): On Friday, Feb. 1, engadget and other sources reported that Amazon (Nasdaq: AMZN) signed a deal to make the hugely popular Downton Abbey television series available only on its Prime Instant Video service. As early as June 18, subscribers to Netflix will no longer be able to access even the first and second seasons.
However, Netflix isn't sitting idly by. In December and January, it signed a couple of major content deals, first with Walt Disney Co. (NYSE: DIS)--an exclusivity deal that will bolster its popular kids section--then with Warner Bros. And the online video giant hinted at additional deals to come.
Both the Amazon and the Netflix deals are the latest salvo in an escalating war for content, but they're not the only players in the game. Ongoing deals among cable MSOs and programmers are shuffling the deck on available programming. For example, while the ink was drying on the Netflix/Warner Bros. deal, word came that HBO had extended its contract with Comcast (Nasdaq: CMCSA)-owned Universal--ending rumors that Netflix would try to pick up Universal's content and signaling that it won't be available on the streaming service anytime soon.
The HBO deal points to the importance that online video has gained among traditional cable providers, which are incorporating on-demand and online streaming services into their subscription packages in order to retain wavering customers. The very popular HBO Go streaming service is still locked inside the walled garden--if you want to watch its original programming on a tablet or other device, you need a subscription to the channel through a cable or satellite provider.
Another battle heating up is the excitement over music video programmer VEVO. The Vivendi-Sony venture is being courted by Google (Nasdaq: GOOG) to the tune of $50 million--just so Google can keep the service on YouTube--and VEVO recently announced a collaboration with Disney Interactive to produce "family-friendly" music videos.
These certainly are interesting times for online video. But even though major players appear entrenched and stable--even Netflix posted a good quarter in Q4--there are plenty of risks. Content is ultimately paid for out of the consumer's pocket. And while viewers probably don't care that a certain number of decade-old movies are no longer available on Netflix or Amazon, they do care about accessing premium programming like Downton Abbey, Game of Thrones and the latest kids' movies. The idea of juggling multiple subscriptions in order to access all the content they want may turn off customers.
Still, we aren't quite in the throes of a Betamax-vs.-VHS battle royale in the consumer space. Things aren't yet bad enough to force viewers to take sides. But programmers, streaming video providers and MSOs need to shake out the wrinkles in their online video models in order to retain subscribers. Beyond the rampant deal-making for content, the big players may need to look at bigger-picture options like consolidation or, heaven forbid, compromise and changes in the structure of content licensing itself.--Sam