Amazon ratchets it up a notch with Epix streaming movie deal

Amazon.com (Nasdaq: AMZN) is willing to dig deep to compete in the online video space, including adding a pay-for-performance provision to its streaming movies deal with cable network Epix, a movie studio partnership between Paramount Pictures, MGM and Lionsgate.

A Reuters interview with an "executive directly involved in the deal" said Amazon agreed to pay more to Epix if the number of Prime Instant Video service subscribers exceeds a certain level. That extra pay-out would come on top of the deal's fixed upfront fee, which is how most subscriber VoD deals are arranged.

"The generous terms of the deal, announced in September, provide the strongest evidence yet that Amazon is willing to pay up to be a player in this market as it faces a dwindling demand for DVDs--once its core entertainment offering--and tough competition for its Kindle Fire tablets," the Reuters story said.

Amazon had nothing to say about the deal--at least on the record to Reuters. Epix did talk, but not necessarily about the deal. Epix Chief Executive Mark Greenberg talked more about Amazon as "a way in which a new, emerging younger audience wants to view content, and they know they can be a significant player in the space," noting "we are happy to help them get there."

Epix is no doubt also happy about the extra payout, which Goldman Sachs media analyst Drew Borst dubbed an example of "online video deals 2.0."

"After doing 1.0 deals with Netflix (Nasdaq: NFLX) and a few with Amazon, it dawned on the media companies that they may want to get a piece of any future growth too," Borst said.

Certainly the deal has grabbed the attention of the rest of the movie content world.

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

Netflix, which declined to comment on the structure of its content deals, Reuters said, has already been beaten over the head on any number of issues, which has caused its stock to rise and tumble over the past week or so. The company's valuation dropped on the news of the deal, then recovered and even showed a little pre-market spike Wednesday morning.

Amazon, some critics have said, needs to pay to play in a game long dominated by Netflix. While the online retailer now has about 25,000 titles available via Prime Instant Video, that's still about half the number available on Netflix. And besides Netflix there's also Hulu Plus, Comcast's (Nasdaq: CMCSA) Streampix and Verizon (NYSE: VZ)-Coinstar's Redbox to contend with.

For more:
- Reuters has this story which appeared in the Chicago Tribune

Related articles:
Netflix riding a rollercoaster of investor emotion
Amazon wins big with deal to add 3,000 Epix movie titles
Roku launches Epix movie channel for authenticated cable subs

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