Amazon Strikes Blow to Netflix With Older HBO Shows on Prime

Apr 23, 2014 4:21 pm ET

(Updates today’s trading in fifth paragraph.)

April 23 (Bloomberg) -- Amazon.com Inc.’s Prime subscribers will soon be able to binge on old episodes of HBO’s “The Wire” and “The Sopranos” -- exclusive programs that rival Netflix Inc. doesn’t have.

Amazon said today that it reached the deal with Time Warner Inc.’s HBO network to stream select TV shows online starting on May 21. Previous seasons of current shows such as “Girls” and “The Newsroom” will become available about three years after airing on HBO, according to the statement.

The deal marks the first time that HBO’s TV shows will be available online to viewers who don’t subscribe to the premium network through cable-TV subscriptions. HBO’s prized library of shows strengthens the e-commerce giant’s lineup in the battle with Netflix, which has used original programs such as “House of Cards” to draw online viewers.

“HBO is gold-plated content that will make the Amazon Prime service much more attractive to potential members,” said Paul Sweeney, an analyst for Bloomberg Industries. “This is a seminal deal for the online-video business. Having a blue-chip programmer such as HBO sign a deal with Amazon Prime validates the online video space in many investors’ eyes.”

Time Warner advanced 1.7 percent to $66, while Amazon, based in Seattle, dropped 1.4 percent to $324.58. Los Gatos, California-based Netflix fell 5.2 percent to $353.50, the biggest drop in a month.

Amazon Prime members get access to streaming shows online as well as two-day shipping of goods for $99 a year.

No Bidding

The multiyear deal includes all seasons of shows such as “Flight of the Conchords” and “Six Feet Under,” and some seasons of “Boardwalk Empire” and “True Blood.” Current hit “Game of Thrones” wasn’t mentioned as part of the arrangement, and other shows currently in syndication on cable are also excluded, such as “Sex and the City,” “Entourage” and “Curb Your Enthusiasm.”

Financial terms weren’t disclosed.

The deal may be valued at $200 million to $250 million over the course of the agreement, assuming $250,000 to $500,000 per episode, estimate Morgan Stanley analysts Stephen Shin and John Egbert. Plus, there would be more revenue for HBO when current series are later added to Prime, they wrote in a report today.

HBO discussed a deal only with Amazon, and there wasn’t a bidding war for the online rights to the content, according to a person with knowledge of the matter who asked not to be named because the talks were private. Jonathan Friedland, a spokesman for Netflix, declined to comment.

Netflix, Hulu

Netflix told shareholders this week in a letter that much of the content on its service, Amazon Prime and Hulu in the U.S. is mutually exclusive and encourages consumers to see value in subscribing to all three networks. Netflix said the bigger competitive challenge is from cable and satellite-TV providers offering online services like HBO GO that require consumers to already subscribe to a cable package on their TVs.

Amazon and other online services are rapidly getting better, putting pressure on pay-TV providers like Dish Network Corp. and AT&T Inc. who are racing to put together cheaper online packages for younger viewers.

Amazon, the world’s largest Internet retailer, has been using free video-streaming to lure more people to Prime. In March, the company boosted the price of its Prime membership by 25 percent to $99 a year, the first increase since the service’s introduction nine years ago.

At the same time, Amazon has pushed to add as much content as possible to its Fire TV box for watching digitally delivered shows and movies. It already includes applications from Netflix, Hulu and CBS Corp.’s Showtime.

The HBO GO app will also be made available on Fire TV by year-end, helping Amazon Chief Executive Officer Jeff Bezos further challenge Apple Inc.’s TV device.

--With assistance from Anthony Palazzo in Los Angeles and Edmund Lee in New York.