Pay-For-Performance: Will Amazon Change Streaming Video Deals?
By Karla Robinson
October 11, 2012
October 11, 2012
- Netflix has essentially been the only online streaming video service and has therefore been able to make favorable content licensing deals. Now Amazon has come into the fray — making generous deals with content creators, which could put pressure on Netflix to ante up.
- Amazon struck a deal with Epix that adds 3,000 movies to its Prime Instant Video service. Recently, it was learned that Amazon agreed to a pay-for-performance provision, demonstrating the online retailer’s willingness to spend big in this area.
- “According to an executive directly involved in the deal, Amazon agreed to an earn-out provision payable to Epix over time if the number of subscribers to Amazon’s Prime Instant Video service rises above a certain threshold,” reports Reuters. “That comes in addition to a fixed upfront fee, the basis for most subscription video-on-demand deals up to this point.”
- “This could be considered online video deals 2.0,” says Goldman Sachs media analyst Drew Borst. “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.”
- DVD sales were previously a significant market for Amazon but demand has since dropped off, giving the company more reason to build out its streaming service to compensate. Pairing its video service with its Prime shipping program allows Amazon to subsidize the content deals with physical sales.
- Netflix has a much larger user base than Amazon and pays around twice as much on content licensing — about two billion a year. However, Amazon pays more than Netflix on a per-subscriber basis.
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