Amazon grabs rights to stream older HBO shows

(REUTERS) - Amazon.com's streaming video service will offer some older shows from premium-cable channel HBO starting next month, a deal that intensifies both companies'competition with subscription-video service Netflix.

This is the first time HBO, owned by Time Warner, has licensed its award-winning programming to an online subscription streaming service, the companies said in a statement on Wednesday.

HBO shows are not available through Netflix. Netflix shares fell 4.7 per cent to US$355.31 on Nasdaq.

The deal does not include the entire library of HBO shows that are available on the HBO Go streaming service. HBO Go will become an option on Amazon's Fire TV device, but only for subscribers to the HBO cable channel.

The partnership with HBO helps Amazon build a stronger case for its Amazon Prime service roughly a month after the largest US online retailer boosted its annual Prime fee to US$99 (S$125) from US$79.

Prime subscribers will have access to the HBO programming on May 21. Most will be older shows such as The Sopranos and The Wire, or earlier seasons from current series such as True Blood. "HBO has the catalog depth to serve as a game-changer for Amazon," Wedbush Securities analyst Michael Pachter said.

Amazon likely agreed to pay US$200 million to US$400 million a year for the rights to HBO programming, Cantor Fitzgerald analyst Youssef Squali estimated.

HBO's top programme, Game of Thrones, is not part of the deal. Older hit series Sex and the City, Entourage and Curb Your Enthusiasm are also excluded because they are tied up in syndication deals on cable.

Episodes of current shows such as Girls, The Newsroom and Veep will become available three years after they run on HBO, the network said.

HBO negotiated the streaming deal with Amazon and did not seek bids from other companies, according to two sources familiar with the deal.

Amazon has been building its content libraries to tap the growing appetite for online video. Like Netflix, it offers original shows including political comedy Alpha House starring John Goodman.

A Netflix spokesman said both Amazon and another one of its competitors, video website Hulu "are acquiring lots of new content that represents the maturation of Internet television, which is great for the consumer". Hulu is owned by media companies Walt Disney, 21st Century Fox and Comcast.

The streaming deal shows a new willingness by HBO to be flexible in licensing as well as a shift away from agreements with traditional cable networks. HBO's past licensing deals have been with cable networks.

HBO and Time Warner's top executives have maintained that the HBO Go product could one day be sold separately but that currently the economics do not make sense.

Time Warner shares gained 1.5 per cent to US$65.90, while Amazon fell 1.7 per cent to US$323.80.