Netflix (Stock Quote: NFLX) has signed a deal with Epix, a pay TV channel launched in October by Paramount, MGM and Lions Gate Studios, to increase the movies available in its online streaming service.
Netflix will pay nearly $1 billion over the next five years to add major titles such as Iron Man 2 to its digital library just 90 days after they’re available to Epix’s premium pay TV and on-demand subscribers. The deal, announced Tuesday, goes into effect Sept. 1. The first crop of movies to be released will include G.I. Joe: The Rise of Cobra, The Pink Panther 2, The Curious Case of Benjamin Button and The Godfather trilogy.
"The Epix deal is an example of the innovative ways we’re partnering with major content providers to broaden the scope and freshness of choices available to our members to watch instantly over the Internet,” Ted Sarandos, chief content officer for Netflix, said in a press release.
The move is meant to help Netflix’s movie subscription service stay relevant in the face of declining mail subscriptions. Netflix currently makes the bulk of its profits by sending movie rentals through the mail, but the increasing popularity of on-demand cable channels, which lets consumers watch their movie choices instantly, is making the company bulk up its online offerings.
Netflix is also using its online streaming initiative as a way to reduce shipping expenditure. According to the New York Times, the company spent close to $600 million so far this year on postage.
Netflix launched its online streaming service in 2007 and currently offers it as part of its $8.99 a month package that includes its DVD deliveries. Initially, existing deals with cable television channels, such as HBO, made it impossible for the company to offer major movie releases over the Internet. However in 2008, Netflix cut a deal with Starz that gave it rights to films produced by Sony and the Walt Disney Company.
Earlier this year, Netflix signed a similar long-term agreement with Relativity Media, which financed or produced films including Robin Hood, Get Him to the Greek and Grown Ups.
The deal with Epix is a big score for Netflix. Sarandos told the Associated Press that Netflix now owns streaming rights covering about 46% of the movies screened in U.S. theaters this year. This figure is comparable to what HBO receives, though the Time Warner-owned channel still holds more rights to the major money-makers.
Netflix's stock price quadrupled during the past two years as its subscribers nearly doubled to 15 million. Meanwhile, its struggling competitor, Blockbuster, removed itself from the New York Stock Exchange.
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