“Amazon.com Inc’s deal to purchase streaming movies from cable network Epix could transform the way such deals are done, thanks to a pay-for-performance sweetener that had not been previously disclosed,” Alistair Barr reports for Reuters.\
“According to an executive directly involved in the deal, Amazon agreed to an earn-out provision payable to Epix over time if the number of subscribers to Amazon’s Prime Instant Video service rises above a certain threshold,” Barr reports. “That comes in addition to a fixed upfront fee, the basis for most subscription video-on-demand deals up to this point.”
Barr reports, “The generous terms of the deal, announced in September, provide the strongest evidence yet that Amazon is willing to pay up to be a player in this market as it faces a dwindling demand for DVDs – once its core entertainment offering – and tough competition for its Kindle Fire tablets. Film studios and TV network executives, meanwhile, now have a worthy foil to play against Netflix – once the only major streaming player – and possibly a template for future deals.”
“Some media companies are treading carefully with Amazon, though, given its track record of driving prices down. In the book and e-book market, where Amazon grew to be the dominant player, it has battled publishers for the right to set its retail prices below wholesale,” Barr reports. “For example, one media company has short-term agreements with Amazon that allow for quick exits if the deal does not go according to plan, said an executive.”
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