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Originally published July 20, 2011 at 7:31 PM | Page modified July 21, 2011 at 12:58 PM to stream CBS-owned TV shows is busy stocking its shelves with more programming and will soon offer streams of older CBS-owned television shows, including...

Los Angeles Times

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LOS ANGELES — is busy stocking its shelves with more programming and will soon offer streams of older CBS-owned television shows, including "Frasier," "Cheers" and "Star Trek," to its online customers.

The move, announced Wednesday, represents the online retail giant's most significant licensing agreement since launching its Amazon Prime video-streaming service in February to compete with Netflix.

Seattle-based Amazon is eager to become a bigger player in the online programming field, and is seen as a possible buyer of the popular video website Hulu. The owners of Hulu — which include Walt Disney Co., News Corp. and Comcast's NBCUniversal — want to sell the service while the market for Internet properties is hot.

Amazon would be a viable competitor to some of the online leaders, including Netflix and Google. Google, which owns dominant online video site YouTube, is among a group of potential bidders for Hulu.

Financial terms and the length of the Amazon-CBS deal were not disclosed. Analysts believe the arrangement spans 18 months to two years.

Marci Ryvicker, a media analyst with Wells Fargo Securities, estimated the deal would bring CBS more than $100 million in revenue over the life of the agreement.

This year, CBS negotiated a larger licensing deal with Netflix, estimated by analysts to be worth $200 million over two years.

Wednesday's transaction allows Amazon to offer some of the same shows Netflix provides.

"We believe that this agreement is structured slightly differently than the Netflix deal," Ryvicker wrote in a report Wednesday morning. "It is a smaller percent of CBS' library; is shorter term and likely has some sort of per-subscriber structure in addition to an upfront payment.

"These differences make a lot of sense to us given that Amazon is still in a 'build-out' phase when it comes to its streaming TV offering."

Beginning in August, those who subscribe to Amazon Prime will have access to episodes of 18 CBS-owned TV series, including Showtime's "The Tudors," and the complete "Star Trek" franchise.

Amazon Prime, a membership program that costs $79 a year, includes free two-day shipping for many products bought on Amazon's site as well as access to the streaming video service.

Internet analyst Mark Mahaney, of Citigroup Investment Research, estimates Amazon has 8 million Prime members in the United States. Netflix has 23 million U.S. customers.

With the deal, Amazon will have more than 8,000 movies and television episodes available through its Prime service plan. That's still much less than the estimated 20,000-plus available from Netflix, which doesn't disclose the exact number.

Later this summer, dozens of CBS shows also will be made available to Amazon's Instant Video service, in which viewers can pay about $1.99 to order a stream of a single episode.

Wall Street appears slightly concerned about Amazon's spending as it amasses entertainment content that could be viewed on a variety of devices, including the company's anticipated competitor to Apple's iPad.

"Amazon can potentially succeed in streaming, but not without material startup losses," Barclays Capital media analyst Anthony DiClemente said in a report. "Streaming media is likely to weigh on Amazon margins."

DiClemente pointed out that Amazon could be paying higher licensing fees than Netflix to secure less content. "We believe, however, that a content strategy is necessary for Amazon's tablet," he said.

Seattle Times business reporter Amy Martinez contributed to this report.

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