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Amazon, Viacom close to web video deal

Washington, February 8, 2012

Amazon.com is about to announce a web video deal with Viacom in what sources said was one of the last steps in a plan to launch a standalone subscription service to compete with Netflix.

The online retailer will unveil the deal as soon as this week, according to two people familiar with the discussions.

Viacom, which owns TV shows and movies from MTV Networks, Nickelodeon and Paramount Studios, would be the latest of several partners Amazon has made deals with for its Prime Instant Video service.

So far, major studios such as CBS Corporation, Time Warner’s Warner Bros, News Corporation's Fox, Sony, Comcast Corporation's NBC Universal and Walt Disney Company have licensed programming to the retailer.

Viacom chief executive Philippe Dauman told Wall Street analysts last week the company would announce a new online video deal this week, but did not name the partner. A Viacom spokesman declined to comment further.

To date, Amazon's Prime Instant Video has primarily been an add-on feature for Amazon prime members, who pay $79 a year for free shipping in the US for most of what they buy.

But Amazon is keen to open up its licensed library of TV programs and movies as a standalone service for non-prime members, and to use it to boost its Kindle Fire tablet, according to people who have spoken with Amazon executives.

Analysts estimate that the retailer sold about 5 million Kindle Fire tablets in the fourth quarter and the company may sell more than double that in 2012.

An essential part of Amazon's strategy is to have lots of content, including video, music and apps, for its tablet users. The Android-based Fire comes with one free month of the prime service, but it is not clear how many owners paid beyond the first month.

Amazon is negotiating with Hollywood studios to expand its existing rights beyond prime, as well as bulking up its library, according to several sources.

In addition, it also has an Amazon instant video download and rental service similar to Apple’s iTunes digital media store.

Last month the number of videos purchased or rented from Amazon instant video, as well as the number of customers, more than doubled in the fourth quarter from the year before. It also said the number of Prime instant video streams rose nearly 300 percent during the quarter.

The web video market, currently dominated by Netflix, is set to become increasingly competitive over the next year as major players such as Amazon, Google and Verizon Communications launch so-called over-the-top services.

This week, Verizon said it formed a joint venture with Coinstar's Redbox video kiosk rental service that will offer video streaming and DVD rentals by the second half of the year. – Reuters




Tags: Viacom | Amazon | Netflix | Web Video Deal | Subscription Service |

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