Amazon.com Inc. has reached an expanded multi-year agreement with Viacom that will bring hundreds of the media company's television shows to Amazon's Prime Instant Video service.
The offerings include some of the best-known shows in children's programming, such as Nickelodeon's "SpongeBob SquarePants," "Dora the Explorer" and "Blue's Clues."
The deal is believed to be the biggest yet for Amazon's video streaming service, in terms of breadth of content and cost. The value of the licensing agreement was not disclosed, though it is estimated to be worth hundreds of millions of dollars, according to a person familiar with the matter who requested anonymity because contract details are confidential.
Amazon is among a number of digital suitors pursuing Hollywood's content -- helping to drive up the price. The Seattle-based retail giant's arrangement with Viacom sets up a multi-screen battle for young viewers, who increasingly watch movies and TV shows via their game consoles, smartphones, tablets and other Internet-connected devices.
Netflix has been courting families, especially younger viewers who gravitate to streaming video services. It created a "Just for Kids" interface that relies heavily on images, to remove any barriers to finding shows. In February, it partnered with DreamWorks Animation to create an original animated series for the service based on the summer film "Turbo.
In April, Netflix told investors that it would allow its deal with Viacom to expire, saying it has been moving away from broad, multi-year deals with networks and cable channels in favor of more selective licensing arrangements.
Netflix has since reached an agreement with the Disney/ABC Television Group to become the only subscription streaming service to offer popular children's shows "Jake and the Never Land Pirates" and the animated "Tron: Uprising."
Amazon doubled-down on its investment with Viacom, securing the largest selection of Nickelodeon and Nick Jr. programs among online subscription services.
"Kids are one of the most-watched TV genres on Prime Instant Video," Bill Carr, Amazon's vice president of digital video and music, said in a statement. "With programs like 'Dora the Explorer,' 'SpongeBob SquarePants,' 'Bubble Guppies' and 'The Backyardigans,' there are hundreds of great shows for kids and parents to choose from.''
Subscribers also will gain access to such MTV and Comedy Central shows as "Teen Mom 2," "Key & Peele" and some episodes of "Jersey Shore." Amazon Prime members pay $79 a year for unlimited two-day shipping of items purchased through the online retailer, and for unlimited streaming access to more than 41,000 movies and TV episodes.
"We are thrilled to be extending and deepening our relationship with Amazon," Philippe Dauman, Viacom's chief executive, said in a statement. "This innovative agreement with provide Prime members with access to even more of our best programming."
According to Bernstein Research, Viacom has become increasingly dependent on streaming service revenue to help boost profits. Subscription video-on-demand (SVOD) made up nearly 5% of the company's operating income in fiscal 2012 -- and 200% of its growth in operating income.
"But SVOD hurts ratings for kids’ networks,” Bernstein media analyst.
“Now the debate is whether SVOD licensing fees offset the ad revenue decline,” he said. “In the short run, we agree 'yes' but going forward, we think 'no.' Cannibalization increases, and licensing fees decrease as the balance of power shifts in favor of the SVOD providers.”
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