CBS Corp., Amazon Strike Streaming Video Deal

6:27 AM PST 07/20/2011 by Georg Szalai
Showtime

The agreement covers full seasons of 18 TV series, such as Showtime hit "The Tudors," "Numb3rs," "Medium," the "Star Trek" franchise, "Frasier" and "Cheers."

NEW YORK - CBS Corp. has struck a non-exclusive TV library content licensing deal with Amazon.com that will provide more TV programming for the latter's streaming video offers.

Financial and other terms of the deal were not disclosed, but some key terms are believed to be comparable to a two-year library content deal that CBS Corp. struck earlier this year with Netflix's streaming service that analysts said is worth $200 million.

The agreement adds 2,000 TV show episodes to the subscription-based Amazon Prime streaming service to bring the total number of Amazon Prime instant videos to more than 8,000 movies and TV shows, the companies said. Included in the agreement, which will help make the service a more attractive alternative to Netflix, are full seasons of 18 TV series, such as The Tudors, Numb3rs, Medium, the Star Trek franchise, Frasier and Cheers.

Starting this summer, dozens of CBS shows will also become available to customers of the iTunes-type Amazon Instant Video service, which doesn't require a subscription, they said. Amazon Instant Video offers more than 90,000 movies and TV shows.

"Amazon has created one of the most popular consumer marketplaces in the world, and we are very pleased to make these titles available to their Instant Video and Prime customers," said Leslie Moonves, president and CEO of CBS Corp. "This new agreement represents another meaningful way for us to realize incremental value for CBS's content."

"Our new deal with CBS makes Amazon Prime even better for customers," said Amazon CEO Jeff Bezos. "We're excited to add thousands of popular CBS programs to our already great selection, all of which stream at no additional cost to Amazon Prime members."

CBS shares rose 2.8 percent to $28.74, while Netflix's stock closed the day down 2.1 percent at $281.40. Amazon's stock lost 1.2 percent of its value and closed at $215.55.

Wells Fargo analyst Marci Ryvicker called the new deal "highly accretive" and "a big positive" for CBS Corp. "Per our calculation, the Amazon deal is likely over $100 million in revenue and could result in more than 6 cents in incremental earnings per share" in 2012, she said in a report.

Comparing the Amazon deal to the Netflix deal, Ryvicker said the new agreement seems to cover a smaller portion of the CBS library, is shorter term - she believes 18 months versus 24 months - and "likely has some sort of per-sub structure in addition to an upfront payment," while Netflix is likely mostly an up-front 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," the analyst said. "We believe that in both deals, the economics are very favorable for both CBS and its online video distribution partners." 

Barclays Capital analyst Anthony DiClemente similarly estimated that the deal will add 5 cents to 7 cents to earnings per share for CBS.

"We believe CBS is also currently in talks with other broadband players such as Google, Microsoft and Facebook for similar non-exclusive digital distribution deals," he said. "CBS’s aggressiveness in the digital space has secured the company’s incremental revenue streams and also mitigates potential cord-cutting risks. We also think Viacom may be on deck for a similar type of broadband licensing agreement."

What does the new CBS-Amazon deal mean for Netflix? "Clearly competition is ramping, and we believe Netflix may be more vulnerable now given its recent pricing changes, but we continue to believe that the depth and breadth of Netflix’s streaming content would be difficult to match," DiClemente said.
 

Email: Georg.Szalai@thr.com

Twitter: @georgszalai

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