Amazon's (AMZN) New Willingness to Pay for Content Will Pressure Netflix (NFLX)
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Netflix (Nasdaq: NFLX) shares are returning some of that 10.5 percent gain in early trading Tuesday amid a couple of news bits this morning.
First, BofA cut its rating on the media streamer from Buy to Underperform, a two-notch move.
Also, a Reuters report out today is highlighting how Amazon.com (Nasdaq: AMZN) is now opening up its checkbook for more streaming content deals following the partnership with Epix announced just last month.
Reuters notes that Amazon is offering Epix an earn-out provision should subs for Amazon's Prime Instant Video service surpass a certain metric. Though the structure is typical for content deals nowadays, Amazon's generous terms are said to point to a shift at the company given that it typically was very frugal in the past.
Once relying on DVD sales for its entertainment segment, dwindling demand in the area is causing the e-commerce giant to rethink its strategy. Additionally, competitor pressure on Kindle Fire sales means it may focus more on content to provide via mobile apps and on Blu-ray, smart TV, and gaming consoles (whichever sign to carry the Amazon Prime service).
That means that content providers might start looking for favorably on Amazon versus Netflix.
Further, Netflix's broader sub base means that it is generally paying more for content right out of the gate. Recent data has Netflix with about 25 million subs in the U.S., versus 9 million Prime Video subs for Amazon.
Netflix is down about 3.6 percent early while Amazon is indicated higher.
First, BofA cut its rating on the media streamer from Buy to Underperform, a two-notch move.
Also, a Reuters report out today is highlighting how Amazon.com (Nasdaq: AMZN) is now opening up its checkbook for more streaming content deals following the partnership with Epix announced just last month.
Reuters notes that Amazon is offering Epix an earn-out provision should subs for Amazon's Prime Instant Video service surpass a certain metric. Though the structure is typical for content deals nowadays, Amazon's generous terms are said to point to a shift at the company given that it typically was very frugal in the past.
Once relying on DVD sales for its entertainment segment, dwindling demand in the area is causing the e-commerce giant to rethink its strategy. Additionally, competitor pressure on Kindle Fire sales means it may focus more on content to provide via mobile apps and on Blu-ray, smart TV, and gaming consoles (whichever sign to carry the Amazon Prime service).
That means that content providers might start looking for favorably on Amazon versus Netflix.
Further, Netflix's broader sub base means that it is generally paying more for content right out of the gate. Recent data has Netflix with about 25 million subs in the U.S., versus 9 million Prime Video subs for Amazon.
Netflix is down about 3.6 percent early while Amazon is indicated higher.
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