July 20, 2011, 4:57 PM

Amazon inks a content deal with CBS

The agreement increases the free videos available to Amazon Prime members by 33%.

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Amazon.com Inc. said today that it will add 2,000 episodes from dozens of CBS Corp. television shows to its Instant Video service, which enables consumers to stream video content from Amazon to view on their web-enabled computers or TVs.

Members of the Amazon Prime free-shipping program will be able to stream the CBS-owned TV shows, including “The Tudors,” “Star Trek” and “Cheers,” at no additional cost to the $79 annual fee for Prime. Adding the CBS content increases the library of streaming content available to Prime members at no additional cost by 33%, from about 6,000 items previously to 8,000 now. Consumers who are not members of Amazon Prime can stream the CBS video content for a fee paid to Amazon through Amazon Instant Video; the fee typically is $1.99 per episode. Amazon’s Instant Video library has more than 90,000 films and TV shows available. 

Amazon did not disclose the terms of its agreement with CBS, but a Wells Fargo Securities analyst estimates Amazon will pay CBS about $100 million over the term of the agreement. The network signed a similar licensing agreement for some of the same content with Netflix Inc. earlier this year. Consumers pay $7.99 per month to stream content from Netflix. Netflix is No. 13 in Internet Retailer’s Top 500 Guide. Amazon is No. 1. 

CBS Corp. president and CEO Leslie Moonves says the agreement with Amazon provides CBS another way to generate revenue out of the CBS archive. “Amazon has created one of the most popular consumer marketplaces in the world,” Moonves says. “This new agreement represents another meaningful way for us to realize incremental value for CBS's content.”

Herman Leung, a senior analyst with Susquehanna Financial Group, which is an Amazon market-maker, says the content agreement adds value to Amazon Prime membership and may help Amazon retain customers in the long run. "The fact that Amazon is adding more value for Prime users is a very strong message that helps it reiterate the value Prime represents to those consumers," he says. "Despite the challenges facing Amazon, like the tax issue, the more value consumers see in Amazon, the less likely they are going to stop shopping at Amazon if they have to pay tax."

 

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