Online retailer Amazon is believed to have included a pay-for-performance clause in the three-year deal it struck with movie channel Epix last month to add around 3,000 titles to the video streaming library of Amazon Prime Instant Video, according to Reuters, citing unnamed sources.
The enhanced terms of the deal are thought to have been offered in addition to a fixed upfront fee, and are already being described by some analysts as capable of transforming the way online video services will negotiate for rights.
The deal with Amazon is thought to have brought the total number of films available on Amazon Prime Instant Video to in excess of 25,000, and provide increased parity with rival Netflix, which has been paying around US$ 200mn per year for exclusive rights to Epix movies, although this exclusivity deal ends this month.
Epix is a pay-TV channel operated by Studio 3 Partners, a joint venture between Paramount Pictures, Metro-Goldwyn-Mayer Pictures, and Lions Gate Entertainment.
Bill Carr, vice president of video and music at Amazon, said at the time of the deal with Epix that his company is “investing hundreds of millions of dollars to expand the Prime Instant Video library.”
The agreement gives Amazon Prime Instant Video subscribers access to such movies as “The Avengers,” “Iron Man 2″ and “The Hunger Games” from Epix’s Hollywood studio owners and partners.
Editor’s view: Profit margins are coming under increasing pressure for over-the-top (OTT) video services: not only do they have to contend with bitter customer resistance to fee increases (as Netflix found out last year), they must stomach rising competition for high-value content, with the increase in costs and sweeteners that this inevitably involves.
The story doesn’t end there either: delivery costs are also ramping up as subscriber counts increase. A recent report from IHS predicted that OTT providers could eventually be forced to change their business models and invest in video content distribution infrastructure due to the efficiency limitations of unicast delivery.
Last week’s CDN World Summit event in London did however provide a bright spark: high-level executives at OTT services and network operators are now speaking regularly to discuss measures for improving performance on both sides, a senior representative at a top cableco told me.