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Amazon Challenges Netflix, Hulu With NBC Universal Film Deal

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July 28 (Bloomberg) -- Amazon.com Inc. reached an agreement letting customers view certain movies from Universal Pictures online, stepping up competition with Netflix Inc. and Hulu LLC.

The deal with Comcast Corp.’s NBC Universal adds films to Amazon Prime’s streaming-video service, the Seattle-based company said in a statement today. Oscar-winning movies such as “Eternal Sunshine of the Spotless Mind,” “Gosford Park,” and “Elizabeth” are part of the pact.

Amazon Prime is a membership program that gives subscribers discounts on shipping for a $79 annual fee. In a push to challenge Netflix and Hulu, Amazon said in February it would offer Prime customers unlimited access to an online video library. Last week, Amazon announced an agreement with CBS that expanded that library to more than 8,000 movies and TV shows. The NBC deal today propels that catalog to more than 9,000.

“This notches up the competitive bar,” said Colin Sebastian, an analyst at Robert W. Baird & Co in San Francisco, in an interview. “Amazon is incrementally doing these deals with the content providers, and over time we think they will have a compelling alternative to Netflix.”

Amazon rose $1.38 to $223.90 at 4 p.m. New York time on the Nasdaq Stock Market. The stock has climbed 24 percent this year. Netflix fell $2.80 to $266.62, and had increased 52 percent this year.

Challenging Netflix

The deal is a direct challenge to Netflix two weeks after that company boosted prices for some subscribers by as much as 60 percent, said Tony Wible, an analyst at Janney Montgomery Scott LLC in Philadelphia, in an interview.

Amazon and other online-video services will “try and win over some of those subscribers that are now upset with Netflix,” Wible said.

Amazon Prime isn’t a threat to Netflix, Chief Executive Officer Reed Hastings said in a July 25 letter to shareholders.

“We have vastly more streaming content, are available on more streaming devices and are purely focused on subscription video streaming,” he said in the letter. “So far, we haven’t detected an impact on our business from Amazon Prime.”

A Netflix spokesman declined to comment beyond remarks made by Hastings in the letter.

Amazon’s deal with NBC includes some of the same content Netflix already offers its customers. Netflix renewed a contract with NBC earlier this month.

Netflix had 24.6 million domestic customers at the end of June. The company offers more than 20,000 movies and TV shows online, according to Steve Swasey, a spokesman, and charges $7.99 a month, or $95.88 a year, for unlimited streaming video.

Hulu Exclusivity

Hulu, a Los Angeles-based Web service that streams TV shows, may be less affected by the Amazon deal because it offers more exclusive content, including recently aired TV shows not available on Netflix or Amazon, Wible said.

Hulu, owned by Walt Disney Co., News Corp. and NBC Universal, is soliciting takeover bids. The company is offering suitors five years of access to shows, including two years of exclusivity, two people with knowledge of the situation said July 19.

The website had 875,000 paid subscribers at the end of June, Hulu said earlier this month. Hulu streams a limited selection of movies and TV shows for free, and offers more content to customers who pay $7.99 a month. Paying subscribers can also stream the content to phones, tablets and TVs.

Christina Lee, a Hulu spokeswoman, didn’t respond to a request for comment.

To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at Tgiles5@bloomberg.net

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