Sept. 4 (Bloomberg) -- Amazon.com Inc., ratcheting up competition with Netflix Inc. (NFLX:US), reached a deal with pay- television channel Epix to offer films such as “The Hunger Games” on the Amazon Prime Instant Video service.
The multiyear agreement increases the number of titles available on the Prime subscription service to 25,000 and marks a doubling since Amazon introduced the Kindle Fire media tablet a year ago, the Seattle-based company said today in a statement. Netflix shares (NFLX:US) fell the most in six weeks.
Amazon, the world’s largest online retailer, is expected to unveil an updated version of the Kindle Fire this week. The tablet comes with a free month of Amazon Prime, a service that costs $79 a year and includes free two-day shipping for online purchases and access to videos. Amazon has been expanding the videos offered for streaming on Prime to compete with Apple Inc.’s iPad and challenge Netflix.
“The goal for Amazon with tablets is to keep people in their ecosystem, and that’s what they’ve done by adding more content,” Edward Williams, an analyst at BMO Capital Markets in New York, said in an interview. “It removes some of the uniqueness of the Netflix content and makes the Amazon offering more competitive.”
Netflix sank 6.4 percent to $55.93 at the close in New York, the biggest decline since July 25, and has lost 19 percent this year. Amazon fell 0.2 percent to $247.88 and has gained 43 percent in 2012.
Amazon’s agreement with Epix lasts three years, according to a person familiar with the transaction who asked not to be identified because the terms aren’t public.
Reed Hastings, chief executive officer of Netflix, said in July the company didn’t anticipate being “affected significantly” when Epix movies became available on competing services.
“Epix is not a particularly large source of total viewing,” Hastings said on a call after the Los Gatos, California-based company reported second-quarter earnings.
Epix’s push to offer a mobile product for pay TV subscribers makes an exclusive streaming deal less valuable, Hastings said.
By moving to a nonexclusive deal, Netflix will probably pay Epix $180 million a year, some $20 million less than it had paid for exclusivity, Tony Wible, an analyst with Janney Montgomery Scott LLC in Philadelphia, said in a research note today. Amazon probably is paying $100 million to $180 million a year for the same content, he said.
Cat Griffin, an Amazon spokeswoman, declined to comment.
Amazon said the Epix partnership expands the number of titles on the Prime service to more than 25,000. Last week, the company said it had more than 22,000.
Netflix, which has more than 27 million members, charges $7.99 a month for unlimited streaming video over the Internet.
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