Apple courts EPIX for upcoming TV: sources

Apr 28, 2012 11:34 AM EDT

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LOS ANGELES - Apple Inc began talks earlier this year to stream films owned by EPIX, which is backed by three major movie studios, on devices including a long-anticipated TV, according to two people with knowledge of the negotiations.

Apple, which now sells a $99 set-top box that hooks up to a television set and lets users stream online content from Netflix and the MLB channel, opened discussions with three-year-old EPIX, created by Lions Gate Entertainment Corp, MGM and Viacom's Paramount Pictures.

One of the sources told Reuters that any discussions would apply to its set-top box and also to upcoming devices that stream content. Apple is widely expected to unveil a full-fledged TV product later this year or in early 2013 to drive its next phase of growth and potentially revolutionize the industry.

Apple has been stymied for much of the past year in securing marquee Hollywood content. Talks with EPIX are in the preliminary stages and no agreement is considered near, the source said.

The talks could be complicated by EPIX's 2010 agreement with Netflix, which pays $200 million a year for the rights to stream movies to its 23.4 million U.S. clients. That deal gives Netflix exclusive streaming rights to EPIX movies through September - before Apple is expected to trot out its planned TV set.

Apple declined to comment on what it called "speculation." A Netflix spokesman had no immediate comment. An EPIX spokesman had no comment.

Netflix CEO Reed Hastings said in an April 23 conference call with analysts that the DVD and streaming service was in a "broad range of discussions" with EPIX about "how to operate most effectively for both of us."

EPIX currently offers movies such as "Rango" and "The Lincoln Lawyer." It will soon add "Thor" and "Transformers: Dark of the Moon," Netflix said in a letter to investors.

Apple has become the world's most valuable corporation by dint of the popularity of its iPhone, which helped revolutionize the smartphone industry, and its more recent iPad.

But many on Wall Street say that with the death of visionary co-founder Steve Jobs, new CEO Tim Cook could take the company forward with a major new product, such as the much-speculated Apple TV.

Apple unsuccessfully tried last year to secure agreements with Hollywood studios for movies and TV shows that it could fashion into its own version of a TV service, according to studio executives who were contacted.

EPIX does not have agreements with larger cable operators like Comcast Corp and Time Warner Cable or with satellite service DirecTV. It has contracts with the Dish satellite service, Cox Cable and other cable operators, it says on its website.

Shares in Netflix closed down 1.6 percent at $83.74 on the Nasdaq. Apple, which snapped a two-week losing streak this week after better-than-expected results, finished off 0.8 percent at $603.

(Reporting By Ronald Grover, Lisa Richwine; Yinka Adegoke, Poornima Gupta; Editing by Gary Hill)