Amazon's EPIX Deal Puts Netflix on Notice

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ParamountIn a single epic -- or EPIX -- deal, Amazon.com (AMZN) has become a legitimate competitor to Netflix (NFLX).

Amazon revealed on Tuesday morning that it has inked a streaming deal with EPIX, giving its Amazon Prime loyalty shopping customers access to 2,000 movies at no additional cost. EPIX may not be a household name, but it's a distributor for Paramount Pictures, MGM, and Lionsgate (LGF).

We're talking about Iron Man 2, Super 8, True Grit, Rango, and many other recent video releases. It also recently sealed a deal to add shows from Comcast's (CMCSA) NBC Universal.

The two deals now take the number of titles available through Prime Instant Video to more than 25,000 movies and TV episodes.

Netflix Can't Be Happy

Shares of Netflix opened sharply lower on Tuesday. The leading video service had an exclusive two-year streaming pact with EPIX, but that contract expires this month.

Obviously it's going to be harder to achieve exclusivity in the future. Studios want to maximize the profit potential of their releases by offering them through as many outlets as possible, and it's no longer a matter of brokering deals only with Netflix.

Amazon hasn't revealed any metrics on the popularity of its Prime Instant Video movie library. It's obviously a sliver of the billion hours that Netflix is now serving monthly. However, this is the kind of deal that legitimizes Amazon.

Until now, Amazon's content was largely old movies, obscure indie releases, and long-canceled television shows. It was generally assumed that Amazon didn't have the means to go after an EPIX-sized deal. Netflix can make big deals because it watches over nearly 24 million domestic subscribers. It's easier to justify the big content contracts.

Amazon will be turning heads now.

Nice Timing, Amazon

It's not a coincidence that Amazon is announcing the deal this week. The company is widely expected to introduce new Kindle Fire tablets on Thursday.

Kindle Fire naturally plays right into the Prime Instant Video streaming service. As long as users have an online connection and a Prime account, they will have access to Thor, Transformers: Dark of the Moon, and more fresh celluloid.

The announcement also comes at a welcome time in raising the competitive bar. It's not just Netflix. Redbox parent Coinstar (CSTR) and Verizon (VZ) have announced plans to introduce a digital video service later this year. Now Verizon and Redbox will need to make sure that they hit the market with a competitive slate of fresh programming.

This market has gone from mildly entertaining to a legitimate fight. Keep watching.



Longtime Motley Fool contributor Rick Munarriz owns shares in Netflix. The Motley Fool owns shares of Amazon.com and Netflix. Motley Fool newsletter services have recommended buying shares of Netflix and Amazon.com. Motley Fool newsletter services have recommended creating a bear put ladder position in Netflix.


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JimmyMackey

Netflix has been facing fierce competition for some time now, and Amazon is hardly the first to encroach on their monopoly. Deep pockets from Amazon only go so far, but at Dish, where I work, I hear about deals with the providers all the time. Those age old relationships give me great selection between both streaming and by-mail discs with my Blockbuster @Home, which is important to me because it costs less than Netflix for both services. Amazon is cheap only because they have so few streaming titles, but I get to have my cake and eat it too.

September 08 2012 at 12:51 PM Report abuse rate up rate down Reply