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Amazon grabs rights to stream older HBO shows

A worker collects items to pack into boxes at Amazon's logistics centre in Graben near Augsburg December 16, 2013. REUTERS/Michaela Rehle
A worker collects items to pack into boxes at Amazon's logistics centre in Graben near Augsburg December 16, 2013. REUTERS/Michaela Rehle

By Liana B. Baker and Lisa Richwine

(Reuters) - Amazon.com's streaming video service will offer some older shows from premium-cable channel HBO starting next month, a deal that intensifies both companies' competition with subscription-video service Netflix.

This is the first time HBO, owned by Time Warner Inc, has licensed its award-winning programming to an online subscription streaming service, the companies said in a statement on Wednesday.

HBO shows are not available through Netflix. Netflix shares fell 4.7 percent to $355.31 on Nasdaq.

The deal does not include the entire library of HBO shows that are available on HBO Go streaming service. HBO Go will become an option on Amazon's Fire TV device, but only for subscribers to the HBO cable channel.

The partnership with HBO helps Amazon build a stronger case for its Amazon Prime service roughly a month after the largest U.S. online retailer boosted its annual Prime fee to $99 from $79.

Prime subscribers will have access to the HBO programming on May 21. Most will be older shows such as "The Sopranos" and "The Wire," or earlier seasons from current series such as "True Blood."

"HBO has the catalog depth to serve as a game-changer for Amazon," Wedbush Securities analyst Michael Pachter said.

Amazon likely agreed to pay $200 million to $400 million a year for the rights to HBO programming, Cantor Fitzgerald analyst Youssef Squali estimated.

HBO's top program, "Game of Thrones," is not part of the deal. Older hit series "Sex and the City," "Entourage" and "Curb Your Enthusiasm" are also excluded because they are tied up in syndication deals on cable.

Episodes of current shows such as "Girls," "The Newsroom" and "Veep" will become available three years after they run on HBO, the network said.

HBO negotiated the streaming deal with Amazon and did not seek bids from other companies, according to two sources familiar with the deal.

Amazon has been building its content libraries to tap the growing appetite for online video. Like Netflix, it offers original shows including political comedy "Alpha House" starring John Goodman.

A Netflix spokesman said both Amazon and another one of its competitors, video website Hulu "are acquiring lots of new content that represents the maturation of Internet television, which is great for the consumer." Hulu is owned by media companies Walt Disney Co, 21st Century Fox and Comcast Corp.

The streaming deal shows a new willingness by HBO to be flexible in licensing as well as a shift away from agreements with traditional cable networks. HBO's past licensing deals have been with cable networks.

HBO and Time Warner's top executives have maintained that the HBO Go product could one day be sold separately but that currently the economics do not make sense.

Time Warner shares gained 1.5 percent to $65.90, while Amazon fell 1.7 percent to $323.80.

(Reporting by Liana B. Baker, Lisa Richwine and Deepa Seetharaman; Editing by Lisa Von Ahn and Alden Bentley)

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