Amazon announced this morning that it struck a deal with HBO to stream old HBO shows as part of its Prime Instant Video service.
The basic gist of the deal: Amazon Prime subscribers get old HBO shows three years after they have aired. The deal starts on May 21, and shows like “The Sopranos”, “Deadwood”, “The Wire”, etc., will be available for streaming. Game Of Thrones will not be part of the deal because it’s too valuable to HBO, says Peter Kafka of Re/Code.
This is being interpreted as a blow to Netflix. The stock is down 3% this morning.
One of the main reasons people subscribe to Netflix is for old TV seasons. They can binge watch shows they missed when they were originally aired. HBO’s original shows have a long shelf life and getting them on Amazon makes Amazon’s video service seem more attractive than Netflix.
Some people think that choosing Netflix versus Amazon is an either/or choice. However, just this week, Netflix CEO Reed Hastings said that the real competition for Netflix isn’t Amazon, it’s traditional TV companies getting their act together and being more Internet friendly. This was in Hastings’ letter to shareholders:
The key thing is that Hastings thinks people are willing to subscribe to both Amazon and Netflix.
This sounds a little bit like a CEO trying to make things better than they really are. But, it also makes plenty of sense. House of Cards and Orange is the New Black make subscribing to Netflix worth it.
Meanwhile, Amazon’s offer to customers is quite different. It bundles its Prime video service with its Prime service which gives customers two-day shipping on Amazon.com. That has its own value which is above and beyond what Netflix offers.
So, while the easy interpretation of today’s news is BAD NETFLIX, GOOD AMAZON, the truth might be that it might not be too bad for Netflix. The real bad news is that Amazon is spending big money to bolster its video service, which will drive up prices for Netflix, but that’s been happening for years, and we’ve already known about it.
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.
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