If Netflix is still smarting after the loss of 800,000 subscribers reported in its dysmal third quarter earnings statement, the company, lead by CEO Reed Hastings (pictured at left) is at least putting on a happy face. But Amazon, lead by Jeff Bezos (pictured at right) is hot on its heels.
On Monday, Netflix announced it had extended its deal with ABC Television to stream popular ABC shows in the U.S. including “Lost,” “Grey’s Anatomy,” “Desperate Housewives,” as well as acquiring “new” content including “Switched at Birth” and “Alias.”
“Disney and ABC have been and continue to be an innovative and supportive partner for Netflix,” said Ted Sarandos, chief content officer, Netflix, in a press release announcing the renewed deal. “The diverse but always excellent programming from the different channels and networks are favorites of our members and we are thrilled to broaden the scope and extend the terms or our relationship.”
The renewed deal, the cost of which to Netflix wasn’t disclosed, includes other streaming content from ABC Studios, Disney Channel and ABC Family.
New episodes of current seasons won’t be available streaming on Netflix until 30 days after the season finale, though. That’s roughly in line with the other new content delays Netflix has seen imposed from its other content streaming partners lately, including The CW, movie studio Dreamworks and cable channel AMC.
The original deal was announced in 2009, back when Netflix could do no wrong and seemed poised for unending growth. How times have changed.
Now Amazon is emerging as a serious threat in the streaming video market, also announcing on Monday that it had entered into its own licensing agreement with ABC Television, which will give Amazon Prime members streaming access to nearly all of the popular content Netflix secured, plus the additional catalog of Marvel animated shows ABC’s parent company Disney acquired when it purchased Marvel for $4 billion in 2009, including “Spider-Man,” “X-Men Evolution,” “Thor & Loki: Blood Brothers” and “Iron Man: Extremis.”
“We are excited to add some of the very best content available from Disney-ABC to Prime instant video,” said Brad Beale, director of video content acquisition for Amazon, in a press release. “This includes every episode of past seasons from the ABC hits Lost and Grey’s Anatomy, fan favorites like Felicity and Greek, the popular Disney Channel show Phineas & Ferb and great animated series from Marvel. We’re working hard to add even more selection for Kindle Fire customers and Prime members leading up to the holidays, and expect to have nearly 13,000 titles available in Prime instant video by early next year.”
Indeed, Amazon is making a big bet on its (comparatively) cheap full color tablet, the $199 Kindle Fire, which was debuted to much fanfare in September and begins shipping November 15. The company is reportedly prepared to take an overall loss of $200 million in the fourth quarter to subsidize the low cost of the Kindle for customers.
Every new Kindle Fire comes with 30 days of free trial for Amazon Prime, a free two-day package shipping service (for goods bought from Amazon) that also contains streaming video access, normally $79 a year.
That’s compared to Netflix, which angered customers by hiking the price of its streaming-only and disc-only plans by 60 percent to $7.99 a month, or about $96 a year for just one of those plans. (The combined plans cost $15.98 a month, or $191.76 for a year).
Of course, Netflix still has many, many more streaming titles than Amazon. Netflix reportedly has 51,000 titles compared to Amazon’s goal of 13,000 “by early next year.” (As a related aside, PaidContent has a helpful chart for comparing all of the respective streaming video services out there.)
But with Netflix making a series of unpopular decisions in the past several months, from raising its subscription prices to announcing then abruptly canceling plans to split its disc-by-mail rentals into a separate company, the momentum is clearly with Amazon.
As Wedbush Securities analyst Michael Pachter told TPM via email: “This isn’t ‘new’ for Netflix, they had Grey’s Anatomy before, and are merely extending an existing relationship. It is new for Amazon, and shows that they intend to compete.”
Pachter further suggested that “Netflix must renew” its contract with Starz, the company that owns the rights to license Disney and Sony Pictures movies.
Netflix’s deal with Starz is due to expire in February 2012, and if it isn’t renewed, Netflix’s library will suddenly shrink by over 1,000 titles. It’s something Pachter doesn’t think Netflix can afford. Starz hasn’t yet announced a deal with Amazon, but that’s something analysts think could easily happen.
“[Netflix] cannot think that replacing relatively new movie content with television content will look the same to their subscribers,” Pachter wrote to TPM. “If Netflix is willing to wait 6 months or so, I think they can renew the Starz deal within the range ($250 – 300 million annually) we all contemplated.”
Shares of Netflix were down 2.4 percent at the time of this posting. Shares of Amazon were down 1.3 percent amid a general Monday U.S. stock market slump.
