An executive directly involved in the deal revealed that Amazon struck a good deal with Epix to an earn-out provision payable to the latter over time if a certain number of subscribers to Amazon’s Prime Instant Video service reach a certain level. That said additional fee comes on top of a certain upfront fee, which is the basis for most subscription video on demand deals at this time.
Amazon is apparently willing to spend more dollars in this deal as evidence of generous terms started coming out last September. Amazon is trying to look for another source of revenue as the market for DVDs dwindles down. DVDs were once the main entertainment product of Amazon. The company also needs another business as it faces strong rivalries for its Kindle Fire tablets.
The deal initiated by Amazon is seen by analysts as a good alternate video deal against Netflix–the leading major video streaming company.
Drew Borst of Goldman Sachs said: “This could be considered online video deals 2.0. After doing 1.0 deals mostly with Netflix and a few with Amazon, it dawned on the media companies that they may want to get a piece of any future growth too.”
Both Epix and Amazon did not give any word on the deal yet.
Netflix had been paying Epix about $200 million every year since 2010 to stream the network’s movies exclusively. After the exclusivity deal ended, Amazon grabbed the opportunity and offered a generous three-year partnership with Epix so it can add 3,000 more movies to its Prime Instant Video. The said deal with Epix was structured so that movie studios could capture rapid Prime Instant Video growth. Apparently, studious can benefit from Amazon’s offerings as it offers more leverage for them against Netflix.
“Hollywood loves it because they can say Amazon is paying us X and we want more from you,” Michael Pachter, an analyst at Wedbush Securities said. “It’s a club they can use to beat Netflix over the head.”
Netflix did not comment how its deals in securing contents are structured.
But Ted Sarandos, Netflix’s chief content officer said: “We never thought that we were going to operate without competition. We were surprised that it has taken this long for anyone to really emerge in a meaningful way.”
While Amazon’s Prime Instant Video service has more already more than 25,000 titles currently, Netfix own collection has double that figure now.
Some smaller video streaming firms are also taking a slice at the video streaming market. Hulu, led by former Amazon executive, has its own video subscription service called Hulu Plus. Comcast also launched its own Streampix while Coinstar and Verizon’s Redbox are to be launched in the near future.
While no official figure was released by Amazon about the number of its subscribers to Prime, one executive claimed to have seen some deals of the company and put the figure at around 9 million. About 3 or four million of this subscriber base had used Prime streaming service, this same person said.