Amazon, HBO Hit Back At Netflix With Streaming Deal

The deal announced Wednesday will make The Sopranos, Six Feet Under, The Wire, and other HBO shows available on Amazon Prime Instant Video. Inc. announced a content licensing agreement Wednesday that will allow it to stream select HBO programming on its Prime Instant Video service.

Popular shows including The Sopranos, Six Feet Under, The Wire, Big Love, and Deadwood, will be among the offerings, according to a release from Amazon Prime.

Eastbound & Down, Family Tree, Enlightened, Treme, early seasons of Boardwalk Empire, and True Blood, as well as miniseries like Band of Brothers and John Adams will also be available beginning May 21.

Terms of the deal were not disclosed. An HBO representative declined to comment beyond the news release.

Previous seasons of newer HBO shows, such as Girls, The Newsroom, and Veep, will become available over the course of the multiyear agreement, approximately three years after airing on HBO, according to the release.

"HBO has produced some of the most groundbreaking, beloved, and award-winning shows in television history, with more than 115 Emmys amongst the assortment of shows coming to Prime members next month," said Brad Beale, director of content acquisition for Amazon.

HBO GO, the company's streaming service that gives access to its new and old shows and movies, will also be available on Amazon's Fire TV by the end of the year. To access HBO GO on Fire TV, however, users will have to be authenticated HBO cable subscribers.

This is the first time HBO has licensed its content to a streaming subscription service. In doing so, HBO is trying to both milk the long tail of its programming catalog while also keeping newer material to itself for a period of time to preserve the value of an HBO subscription and its own HBO GO streaming service. By making shows available after a three-year time period, HBO is basically creating another release window for programming to do along with DVD and on-demand. The move follows a similar pattern to that of theatrical movies, whose releases on DVD, pay-TV, regular TV, on-demand and streaming are staggered to maximize profit and not cannibalize viewers in each window.

Further, according to a source with knowledge of the deal, HBO's thinking is that three years is also soon enough drive subscribers back to the service through sampling. Call it the Breaking Bad effect — that show's ratings increased dramatically in later seasons after earlier ones were made available for streaming on Netflix. So, for instance, both Girls and Veep will be on Amazon Prime before their fourth season premiere on HBO.

There are, however, some glaring omissions from the deal. Game of Thrones, arguably HBO's biggest show ever, is not included, for instance. And Sex and the City, Entourage and Curb Your Enthusiasm are also not included because they are tied up in syndication elsewhere.

While the deal is HBO's first-ever with a streaming service, licensing out its content to other platforms is something the network has done selectively before. It licensed The Sopranos to A&E, for instance, Six Feet Under to Bravo, The Wire to BET, and Sex and the City to TBS, among other deals for its programming.

Amazon desperately needed a deal for marquee programming to generate buzz for its Prime service and to better compete with Netflix. The promise of legendary shows such as The Sopranos and The Wire can possibly draw new viewers to its service.

The source with knowledge of the deal said HBO did not put its content out for bid and negotiated exclusively with Amazon. The two companies have a prior relationship through Amazon's Kindle, where HBO Go is available, and through the sale of DVDs of HBO programming on Amazon.

The announcement of the Amazon–HBO deal comes on the heels of Netflix's news on Monday that its first-quarter earnings had beat analyst expectations. Netflix also said it added 4 million global subscribers for a total of 48.35 million. The company also said it plans to raise prices for certain subscribers, a move that may impact future subscriber and revenue growth.

Reed Hastings, in his first-quarter letter to shareholders, said that Netflix concluded "a one or two dollar increase [in subscription prices], depending on the country, later this quarter for new members only" is warranted. Existing subscribers will continue to pay their current membership fees "for a generous time period," Hastings wrote. By way of example, after raising prices in Ireland last year, Netflix grandfathered in all existing subscribers to pay their current rate for a period of two years.

"These changes will enable us to acquire more content and deliver an even better streaming experience," he said.

Highlighting competitors ranging from CBS and HBO to Amazon and Yahoo, Ted Sarandos, Netflix's head of content, said of acquiring programming that the "bidding can get quite high for certain talent" and that the company is "committed to larger budget shows." Sarandos said Netflix still plans to double its budget for original programming but to keep it below 10% of its overall content spend.

Indeed, part of the reason Netflix is raising membership fees, something it hasn't done since 2011, is in part because it needs more money to fund programming costs. Though terms of the Amazon-HBO deal weren't disclosed, it is safe to assume that HBO was paid a premium over current market rates for its content. But Amazon has deep pockets so it can afford to pay a premium, and if that drives up cost of programming in the marketplace overall that could have indirect adverse effect on Netflix, which doesn't have as much money to buy or make shows as others.

Netflix released the second season of House of Cards during the quarter and, as usual, did not provide viewership figures, except to say that it "attracted a huge audience that would make any cable or broadcast network happy."

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