Dec 23, 2015

Not Ready for Prime Time: Why Amazon’s Not Going to Become the Next Comcast

Originally published at on December 9, 2015

Just a few days after rumors surfaced that Amazon would begin selling other OTT services through its Prime subscription service, the e-commerce behemoth announced that both Showtime and Starz subscriptions (along with 17 smaller, OTT-only providers) would be available as add-ons to Prime.

Is this the sign of a new era in pay TV, where large OTT services like Amazon will begin to offer their own bundles, essentially replacing pay-TV operators? And if it is, is that a positive development for the industry?

While it’s tempting to entertain the notion that Amazon could displace the MVPDs, it’s also unlikely.

To begin with, it’s unlikely that Amazon will be able to strike deals with enough networks to create any kind of competitive alternate service. It’s one thing to get a few premium networks like Showtime and Starz, but quite another to get NBC.

Showtime, whose service is also available through Hulu, seems to be taking the tack of making its apps available through as many outlets as possible. That’s not a bad strategy for a network that always seems to be a few steps behind HBO, despite having a wealth of quality current programming (“Homeland,” “The Affair”) and a fairly deep bench, (“Dexter,” “Queer As Folk,” “Weeds”). Providing one more location for non-subscribers to sign up makes sense for Showtime.

It Doesn’t Make That Much Sense for Most Other Networks.
That’s because the real value for networks in creating any type of standalone over-the-top (OTT) solution is the ability to gather data about their customers. While that value is offset by the costs of setting up and marketing an OTT solution, there’s not much incentive for them to let Amazon handle things, especially when Amazon, as a creator of Golden Globe and Oscar winning original content, is in fact competing with them.

There’s no reason for any network to give that kind of valuable data about subscribers and their viewing habits to a competitor. Even less reason when that competitor is an online retailer like Amazon. Amazon could map that information to actual purchases and thus learn even more about the audience, and then use that information to inform its own programming decisions.

What’s in It for Consumers?
For the consumer, the only real reason to go for the add-ons is the convenience of a single bill. That could be appealing to someone whose only OTT service is Amazon, but that seems a very limited scenario, given Netflix’s 50 million plus users. (Amazon does not release information on how many Prime subscribers it has.)

While Amazon has had success with Prime’s original content, the rest of the service can be somewhat confusing. Amazon uses a hybrid SVOD/TVOD model, and so some shows and movies are available for free with Prime and others require an additional fee. Throw in a bunch of pay-to-subscribe programming from other providers and things can get even murkier.

The Future Belongs to the MVPDs
While Amazon may have some initial success selling additional subscriptions, we don’t see this solution–larger OTT providers selling subscriptions to smaller ones–becoming any sort of a trend. As we’ve predicted previously, we feel that the most likely future is one where MVPDs begin selling OTT services to their broadband customers as an alternate or add-on to their traditional pay-TV service.

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