Amazon.com (NASDAQ:AMZN) has fired the next shot in the war for your living room. In the digital age, consumers are slowly cutting the cord on traditional cable subscriptions and moving toward streaming services and devices. That's resulted in a constant tug-of-war between major streaming providers to obtain content. The most recent deal involves Amazon teaming up with Time Warner's (NYSE:TWX) HBO, through its Prime streaming service.
Amazon and HBO struck an agreement in which HBO will allow some of its series to be available on the Amazon Prime service. This is getting a lot of attention through the financial media, since it represents the first time Time Warner has licensed its programming to an online streaming service.
In addition, many are seeing this as a clear blow to Netflix (NASDAQ:NFLX), since HBO is not available on Netflix at this time. Netflix shares sunk on the day of the announcement. But here's why I think this deal is not a Netflix killer and is much ado about nothing.
Amazon to mostly provide old content
A key caveat to this deal is that Amazon Prime customers will only have access to older shows, such as The Sopranos or The Wire, which have long stopped airing new episodes. It stands to reason that consumers who wanted to watch those shows have already done so. Current shows, which are airing new episodes, such as Veep or Game of Thrones, will not be available on Amazon Prime until three years after the original airing.
Netflix already offers certain shows that aired on premium channels, such as Showtime's Dexter. It doesn't seem like such programming makes or breaks Netflix's subscriber numbers. Actually, the deal seems to benefit Time Warner the most. That's because it probably realized that older shows are stale, and this is a convenient way to further monetize old programming. Moreover, it's crucial to remember that you're not getting access to new programming on Amazon Prime.
For consumers who are actually interested in watching older HBO shows, Netflix has an available option. For example, consumers who want to watch The Sopranos or the first season of Game of Thrones could rent them from Netflix's DVD service.
Where Amazon really struck a blow
Amazon's share price fell on the day of the announcement, which implies that investors don't see this as a ground-breaking deal, and certainly not something that will sink Netflix. It seems that Netflix is frequently used as a complement to streaming TV devices like Amazon Fire TV and not necessarily a substitution. Amazon's Fire TV device comes with a free 30-day trial of Netflix.
However, one area in which Amazon does gain an advantage is by obtaining rights to display HBO GO. Amazon's deal with HBO looks like more of a blow to other streaming device makers such as the Apple TV, Google Chromecast, and Roku.
The bottom line is that the biggest winner of the deal appears to be Time Warner. It has secured a way to further monetize older programming, and potentially increase subscribers if Amazon Prime members take to its programming. Amazon looks to be a winner as well, in the sense that it will more effectively compete with other streaming devices.
Netflix may seem like a loser from this deal, but that's not likely to be the case. Netflix has a well-established customer base. Those subscribers probably won't be lured away just by being able to watch HBO shows that are no longer airing new episodes.
The bigger battle appears to be in new programming, in which Netflix holds an ace up its sleeve in the form of its hit show House of Cards. Netflix doesn't appear to be a direct competitor with Amazon, but rather a complementary service. As a result, don't expect a mass subscriber exodus from Netflix any time soon.
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Bob Ciura has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Netflix. The Motley Fool owns shares of Amazon.com and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.