Amazon said to plan film, TV Web service with studios

By Sarah Rabil, Andy Fixmer and Joseph Galante
(c) 2010 Bloomberg News
Wednesday, September 1, 2010; 9:46 AM

Sept. 1 (Bloomberg) -- Inc. has approached media companies including Time Warner Inc. with plans to start an online video subscription service to rival Netflix Inc., said three people with knowledge of the talks.

The service, sold for a monthly fee by the Seattle-based Web retailer, would consist of older films and TV shows, said the people, who asked not to be identified because the conversations are private. They said talks are early and could still fall apart.

Time Warner, MTV owner Viacom Inc. and General Electric Co.'s NBC Universal have all been contacted, the people said. Chief Executive Officer Jeff Bezos is broadening the retailer's digital entertainment services to combat rivals such as Netflix, Hulu LLC and Apple Inc., which distributes a range of music, TV and film through its iTunes online bazaar.

Amazon would structure content deals in ways similar to Netflix, which pays media companies for rights to stream TV shows and films over the Web, said one of the people.

"A serious move into subscription content -- while perhaps appropriate strategically -- could further weigh on earnings capability," Douglas Anmuth, an analyst with Barclays Capital Inc. in New York, wrote in a note today. He rates Amazon "overweight."

While Amazon has the brand and user base to compete in online streaming, acquiring content will be expensive, Anmuth wrote. Netflix has the advantage of a hybrid subscription model with streaming and mail-order DVDs, which helped subsidize the shift to streaming, he said.

Keith Cocozza, a spokesman for New York-based Time Warner, declined to comment.

Amazon spokesman Craig Berman, Rebecca Marks, a spokeswoman for New York-based NBC, and Kelly McAndrew, a spokeswoman for New York-based Viacom, also declined to comment.

The subscription service would be accessible on Web browsers and Internet-connected TV sets, Blu-ray players and Microsoft Corp.'s Xbox 360 video-game console, according to the Wall Street Journal, which reported Amazon's plans yesterday.

The subscription offering would be a shift from Amazon's video-on-demand service that has gained limited traction with consumers, Anmuth said. Amazon currently sells film and TV show downloads and rents movies through its website and on Roku Inc., TiVo Inc. and Sony Corp. devices, among others. Warner Bros. is the biggest non-network producer of broadcast television shows.

Apple, based in Cupertino, California, plans to announce a new set-top box that includes programming from Netflix, three people with knowledge of the plans said yesterday.

Amazon gained $1.59 to $126.42 at 9:32 a.m. New York time on the Nasdaq Stock Market. Before today the shares had lost 7.2 percent this year.

© 2010