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Epix signs with Amazon, ending exclusivity with Netflix

September 04, 2012|By Ben Fritz
  • Movies including "Transformers: Dark of the Moon" will be available to Amazon Prime subscribers via a new partnership with pay cable channel Epix.
Movies including "Transformers: Dark of the Moon" will be available…

"The Transformers," "Hunger Games," "The Avengers" and "Paranormal Activity" are headed to Amazon.com.

Pay cable channel Epix has signed a digital distribution deal with the online retail giant, ending speculation that it might continue its current exclusive arrangement with Netflix.

 Under the partnership that launched Tuesday, new movies from Paramount Pictures, Lionsgate and Metro-Goldwyn-Mayer will be available to consumers who subscribe to Amazon Prime, which provides unlimited two-day shipping for products and streaming of 25,000 movies and television episodes on digital devices.

Several titles including "Iron Man 2" and "Warrior" are immediately available to Amazon Prime subscribers, with more to be added soon. That will be significant to Amazon as it's expected to launch a new version of its Kindle Fire tablet on Thursday. Kindle Fire buyers get Prime Video free for a month.

Epix, which is co-owned by MGM, Lionsgate and Paramount's corporate parent company Viacom Inc., controls the rights to those studios' movies during the "pay television" window, which typically starts several months after films become available on DVD.

The news signals the loss of a competitive advantage for Netflix, which has enjoyed exclusive online rights to Epix's movies since signing a groundbreaking agreement with the pay cable channel in 2010.

Netflix's deal with pay channel Starz, which controls movies from Sony Pictures and Walt Disney Studios, expired earlier this year, leaving Epix as Netflix's only source of new feature films from major Hollywood studios. Netflix still maintains exclusive deals with several independent studios including DreamWorks Animation and Relativity Media.

In a research note, B. Riley & Co. analyst Eric Wold wrote, "While Netflix is not losing access to Epix content, we believe having it available now through competing [subscription video-on-demand] plans will dilute the attractiveness of Netflix and could cause subscriber defections to other plans."

A Netflix spokesman noted that Epix movies account for 5% of viewing hours on its streaming service.

In a letter to shareholders in July accompanying his company's financial results, Netflix Chief Executive Reed Hastings noted that the previous exclusivity period ended in July. But on a follow-up conference call, he declined to answer an analyst's question about whether he would try to renew the arrangement.

Netflix had been paying about $200 million per year for exclusive rights to Epix movies. That amount is sure to be reduced now that the arrangement is non-exclusive. Netflix could use the savings to invest in other video for its streaming service, particularly television programming, which now makes up more than 60% of hours watched.

Epix movies will continue to be available through Netflix for at least another year. The two companies will have the option to renew their partnership for one-year periods in 2013 and 2014.

For the pay channel and its owners, going non-exclusive should help bring in even more revenue. In addition to Amazon.com and Netflix, Epix could strike similar deals with other competitors popping up in the digital space, including a soon-to-launch joint venture from Redbox and Verizon.

That's critical as Epix has struggled to gain traction on television. It is available through the Charter and Cox cable systems and to Dish Network satellite subscribers, but not through such major providers as Comcast and Time Warner Cable.

Terms of the Amazon deal and the length of the multi-year term were not disclosed.

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