(Updates with executive’s comment in final paragraph.)
Feb. 8 (Bloomberg) -- Amazon.com Inc. added Viacom Inc., the owner of the Nickelodeon and MTV cable networks, to the list of partners providing shows and movies to its video-streaming service, expanding the library by 15 percent to 15,000 titles.
Amazon Prime members, who get free two-day shipping and access to an online streaming video service for $79 a year, will be able to watch programs such as MTV’s “Jersey Shore” and TV Land’s “Hot in Cleveland,” the Seattle-based company said today in a statement. Financial terms weren’t disclosed.
Chief Executive Officer Jeff Bezos has bolstered the video service with films and shows from studios including News Corp.’s Fox and Warner Bros. in part to spur sales of the Kindle Fire tablet computer. Amazon spends about a third of Netflix Inc.’s $1 billion a year on content deals and needs to expand streaming video rights to compete, according to Brian Nowak, an analyst at Nomura Securities in New York.
“You either have to build the device that everyone wants or have a price point that excites people and an ecosystem that goes around that,” said Kerry Rice, an analyst at Needham & Co. in San Francisco who recommends holding Amazon shares. “Amazon has built a great ecosystem, and this just adds to that.”
Amazon rose 0.7 percent to $185.48 at the close in New York. The stock has gained 7.2 percent this year. Netflix, the online video operator based in Los Gatos, California, dropped 3 percent to $124.
Prime customers can watch 2,000 titles from Viacom starting today, including “Dora the Explorer” and “The Real World.”
While Amazon, the world’s largest online retailer, sells the Kindle Fire at a loss, it may make $136 on each device after sales of books, movies and music, according to Ross Sandler, an analyst at RBC Capital Markets.
Videos bought or rented and the number of customers on the Amazon Instant Video online streaming service more than doubled in the fourth quarter from a year earlier, Amazon said last month. Video streams almost quadrupled.
While more online video offerings will probably help profit margins down the road by luring more consumers to pay annually for Prime and buy more goods on Amazon’s site, such deals could hurt earnings in the near term, Nomura’s Nowak said. Amazon’s operating margin narrowed to 1.8 percent last year from 4.1 percent in 2010, and the company is forecasting an operating loss of $200 million to a gain of $100 million in the first quarter.
To compete with Netflix, Amazon would have to increase the estimated $300 million to $400 million it spends on streaming- video rights, Nowak said.
Users are showing more interest in bingeing on video -- or watching a series from episode one to the end -- and Amazon will be expanding content offerings as customer demand increases, said Brad Beale, Amazon’s director of video-content acquisition.
“We’re going to continue working on adding more content to Prime,” Beale said in an interview. “I can’t peg a particular budget number, but I can absolutely tell you that there’s more really good stuff to come.”
--Editors: Cecile Daurat, Jillian Ward
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