Amazon.com Inc is about to announce a Web video deal with Viacom Inc in what sources said was one of the last steps in a plan to launch a standalone subscription service to compete with Netflix Inc.
The online retailer will unveil the deal as soon as this week, according to two people familiar with the discussions.
Viacom, which owns TV shows and movies from MTV Networks, Nickelodeon and Paramount Studios, would be the latest of several partners Amazon has made deals with for its Prime Instant Video service. So far, major studios such as CBS Corp, Time Warner Inc's Warner Bros, News Corp's Fox, Sony Corp, Comcast Corp's NBC Universal and Walt Disney Co have licensed programming to the retailer.
Viacom Chief Executive Philippe Dauman told Wall Street analysts last week the company would be announcing a new online video deal this week, but did not name the partner. A Viacom spokesman declined to comment further.
To date, Amazon's Prime Instant Video has primarily been an add-on feature for Amazon Prime members, who pay $79 a year for free shipping in the United States for most of what they buy.
But Amazon is keen to open up its licensed library of TV programs and movies as a standalone service for non-Prime members, and to use it to boost its Kindle Fire tablet, according to people who have spoken with Amazon executives. An Amazon spokeswoman did not respond to telephone calls seeking a comment.
Analysts estimate that Amazon sold about 5 million Kindle Fire tablets in the fourth quarter and the company may sell more than double that in 2012.
An essential part of Amazon's strategy is to have lots of content, including video, music and apps, for its tablet users. The Android-based Fire comes with one free month of the Prime service, but it is not clear how many owners paid beyond the first month.
Amazon is negotiating with Hollywood studios to expand its existing rights beyond Prime, as well as bulking up its library, according to several sources.
In addition to Prime Instant, it also has an Amazon Instant Video download and rental service similar Apple Inc's iTunes digital media store.
The retailer said last month the number of videos purchased or rented from Amazon Instant Video, as well as the number of customers, more than doubled in the fourth quarter from the year before. It also said the number of Prime Instant Video streams rose nearly 300 percent during the quarter.
The Web video market, currently dominated by Netflix, is set to become increasingly competitive over the next year as major players such as Amazon, Google Inc and Verizon Communications Inc launch so-called over-the-top services.
This week, Verizon said it formed a joint venture with Coinstar Inc's Redbox video kiosk rental service that will offer video streaming and DVD rentals by the second half of the year.
(Reporting By Yinka Adegoke in New York; additional reporting by Alistair Barr in San Francisco; editing by Andre Grenon)