A new pact between cable channel Epix and video rental giant Netflix to stream movies online represents a direct challenge to pay television channels such as Showtime and HBO. Under the agreement, Netflix subscribers will get to stream box office hits such as "The Last Airbender" and "Iron Man 2" 90 days after their premium pay TV and subscription deals.
It also dramatically increases the number of titles that Netflix offers its customers to stream directly to their computers at a time when the company is trying to encourage subscriber to migrate towards digital distribution.
Epix is a year-old channel launched by Paramount, Lionsgate and MGM. The agreement with Netflix is an exclusive one.
It will cost Netflix a pretty penny though. The company declined to comment on the financial terms of the deal, but according to the Los Angeles Times it ponied up close to $1 billion over five years for rights to the films. That translates into $200 million a year, or 20 percent of the total amount that Netflix spent on content the previous year.
"It's expensive," Ted Sarandos, Netflix's chief content officer, told TheWrap. "We plan to measure the payback in subscriber growth and retention.
"This is part of who we are — a low priced unlimited subscription company, and our customers are reacting to economic proposition and the completeness of value they get for their nine bucks," he added.
Movies will begin streaming on Sept. 1, the companies said.
Epix said it would make its films available to Netflix 90 days after their premium pay TV and subscription on-demand debuts.
For Netflix, it’s another step away from its business of sending DVDs to members in the mail and toward serving up movies on-demand online.
"Adding EPIX to our growing library of streaming content, as the exclusive Internet-only distributor of this great content, marks the continued emergence of Netflix as a leader in entertainment delivered over the Web,” Ted Sarandos, Netflix chief content officer, said in a statement announcing the Epix deal.
Epix is currently available in over 30 million U.S. homes through carriage deals with Verizon FiOS, DISH Network, Cox Communications, Mediacom, Charter Communications and NCTC.