Market Watch

Epix Licenses Movies to Netflix Watch Instantly



Netflix is to offer movies from multiplatform pay TV channel Epix in its online streaming service Watch Instantly from 1 September 2010. The multi-year deal gives Netflix access to select new releases and catalogue titles from Epix's three equity partners - Paramount, MGM and Lionsgate.

However, Netflix subscribers will not have access to new titles from Epix until 90 days after they have been released on the pay TV channel. According to reports, Netflix's deal only entitles it to offer up to 300 of the movies in the Epix library and will not allow it to offer content in HD.

Launched in October 2009, Epix offers access to SD and HD movies on its subscription TV channel, as well as bundled SVOD services available via walled garden TV providers and online at epixhd.com for $9.99.

Analysis
Even with restricted access to Epix titles, this deal sees Netflix inch closer to pay TV territory. Netflix recently secured exclusive rights to Relativity Media titles in the pay TV window and offers movies from Disney and Sony in that window under a deal with pay TV channel Starz. Much of the Watch Instantly library comprises older titles outside the pay TV window licensed directly from the studios so the Epix deal will expand the 'middle tail'.

The announcement comes just over a week after Netflix's second quarter earnings call during which it outlined plans to significantly increase spending on online content licensing in the 2H 2010 compared with 1H 2010 - when it agreed the Relativity dealĀ - which it claims was a substantial increase over 2H 2009. By aggressively increasing investment in expanding the Watch Instantly content offering over 2010, Netflix will aim to consolidate its efforts to extend the reach of the service - it is now available on a wide range of connected devices including TVs, Blu-ray players, the iPad and all three current generation games consoles - and up its stake in the living room beyond its established DVD-by-post subscription business.

The companies which occupy the traditional pay TV space have been moving in the other direction, launching online services in an attempt to stave off the threat from over-the-top services like Watch Instantly. HBO for example, which holds pay TV rights to movies for Warner, Universal and Fox (see link below for details on US pay TV movie rights) has engaged with Comcast and Verizon on their TV Everywhere propositions, enabling the MSOs' customers taking HBO dealsĀ to access select content online. But alongside Watch Instantly these services look comparatively conservative, with access limited to the PC and content offerings restricted.

In fact, Epix has arguably been the most progressive of the premium movie networks. Since launch it has made movies available for streaming online in HD on a bundled SVOD basis via its own website. There are presently around 1,500 movies on epixhd.com compared with around 600 hours of programming in total (covering TV shows and movies) on HBO Go.

For Epix, the Netflix deal will go some way towards helping it reach its goal of becoming cash flow positive by year two, having so far struggled to secure carriage with major MSOs. The studio JV will hope that by maintaining a window of exclusivity for its pay TV channel it can avoid antagonising the operators with which it has agreed carriage deals and leave the door open for those with whom it has not. Epix is currently carried by a handful of smaller pay TV operators - Cox, Charter, Verizon and Dish Network among them - but there are several significant holdouts, including Comcast, Time Warner Cable and DirecTV.

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