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Amazon.com reaches deal to offer streams of CBS-owned TV shows

July 21, 2011|By Meg James and Ben Fritz, Los Angeles Times

Amazon.com 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.

Amazon.com 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% to $28.74 a share. Amazon shares slipped 1.2% 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.

meg.james@latimes.com

ben.fritz@latimes.com

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