If parents of preschoolers want to plop their children in front of the laptop or tablet to watch “Blue’s Clues” and “Dora the Explorer,” they may have to join Amazon’s subscription streaming service.
That put pressure on Amazon to secure children’s programming for its Amazon Prime subscription service, which it hopes will compete with Netflix and Hulu in the streaming video market.
Amazon has a smaller streaming audience than Netflix, but for Viacom the arrangement presents the opportunity to have tie-ins with the consumer products that Amazon sells, like DVDs, “Dora” backpacks and “SpongeBob SquarePants” beach towels.
“They’re a very consumer driven company and they also connect our Nickelodeon content to products,” Philippe Dauman, Viacom’s chief executive, said in a telephone interview.
As part of the deal announced on Tuesday, Amazon also secured the rights to stream shows that are first broadcast on Viacom’s Comedy Central and MTV, including some episodes of “Jersey Shore” and “Teen Mom 2.” But the key to the agreement is making Amazon’s Prime Instant Video subscription service the exclusive outlet for pre-school-age children to watch old episodes of shows like “Dora the Explorer,” “Go, Diego, Go!” and “The Backyardigans.” Since children do not mind reruns as much as adults do, deals for these types of shows often cost less than series aimed at adults.
Bill Carr, Amazon’s vice president of digital video and music, said in a statement that children’s programming was “one of the most-watched TV genres on Prime Instant Video.”
In a letter to customers, Jeffrey P. Bezos, Amazon’s chief executive, said the deal gave Prime Instant Video more than 250 TV seasons and more than 3,900 episodes from Nick Jr., Nickelodeon, MTV and Comedy Central. “We have increased by 55 percent the number of episodes available to top Prime shows for kids,” Mr. Bezos wrote. The deal, he said, added “400 episodes of new shows like ‘Team Umizoomi,’ ‘Bubble Guppies,’ ‘Victorious,’ ‘Big Time Rush’ and ‘Drake & Josh.’ ”
Amazon Prime members pay $79 a year for two-day free shipping, monthly Kindle e-book rentals and video streaming. The company has said it has millions of Prime subscribers but has declined to give an exact figure. Netflix has 27 million streaming subscribers in the United States. Hulu’s subscription service, Hulu Plus, has about four million.
In the past, Viacom has had a complicated relationship with subscription video on-demand services like Netflix. After an unexpected ratings drop at its Nickelodeon channel last year, analysts partly blamed a glut of old episodes available to Netflix for cannibalizing the cable channel’s ratings. Children increasingly watch shows via streaming, but revenue from digital syndication deals still does not come close to that provided by advertisers who pay to reach viewers the old-fashioned way.
In the quarter that ended March 31, advertising revenue at Nickelodeon and Nick Jr. rose 2 percent as the network rebounded with preschool audiences. Mr. Dauman said a fresh pipeline of shows had improved Nickelodeon’s ratings. As advertising revenue grows on the cable channel, Mr. Dauman has defended deals with digital subscription streaming services as good for both parties.
“Our job is to grow the pie,” Mr. Dauman said. “And having all these different revenue streams grows the overall pie.”
Viacom will need to make an additional $125 million to $150 million in streaming deals in fiscal year 2013 to meet its goal of 10 percent affiliate growth, according to Bernstein Research.
Amazon has rapidly built its streaming service to compete with more established services, namely Netflix and Hulu. The Viacom deal is the latest example of the online retailing giant’s swooping in to gain streaming rights after deals with Netflix expire.
After Netflix declined to renew its rights to popular cable series like “Pawn Stars,” Amazon jumped in. In December, Amazon struck a deal with Time Warner to gain the exclusive streaming rights to TNT’s “The Closer” and “Falling Skies.” Netflix got exclusive rights to TNT’s “Dallas.”
Amazon and CBS have a deal that will let Prime subscribers watch “Under the Dome,” a new science fiction series based on the Stephen King novel, four days after episodes are broadcast on CBS beginning June 24
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