Why a Heavy Expansion of Amazon Prime Instant Video Makes Sense

Fire TV

According to Bloomberg, Amazon is planning a massive expansion of its Instant Video service in the US:

Amazon.com Inc. will soon let viewers of its Prime Instant Video service tap into other on-demand networks, according to people with knowledge of the plans.

Prime customers will have the option of adding other online subscriptions to their accounts, including major, well-known movie and TV channels, and Amazon will also sell prepackaged bundles of its own creation, said the people, who asked not to be identified or disclose the names of the partners because the plans are private. They said the new feature may go live as soon as next month. (..)

Prime Instant Video would resemble something between a cable-TV subscription, though without live programming, and the online array of video offered through devices from Roku Inc., Apple TV or Amazon’s own Fire TV.
Amazon will feature videos from the added services within Prime, along with its own original shows and licensed programming, and include its partners’ branding as well, the people said.
Those on-demand networks will now be available in one place. Amazon will manage customer relationships for major media companies the way pay-TV services do, according to the people. (..)

The changes to Prime Instant Video are separate from Amazon’s ongoing effortto start a live online-TV service that would compete directly with cable TV. Amazon continues to talk to media companies about that service, which could interest more users in the Fire TV. Apple is pursuing a similar strategy.

Now, there is no point in commenting and analyzing this much further until it is officially announced and the details become known.

But this rumor makes a lot of sense on several fronts:

  • Releasing this new service right before the holidays will give the Fire TV a lot of publicity and subsequent significant sales.
  • Given the new version of Apple TV being released just a few weeks ago and the holiday season being right around the corner, this smells like a controlled leak by Amazon. Potential buyers for a new generation TV streaming box might know that something big is coming to the Fire TV. (With this new service most likely going to be exclusive to the Fire TV.)
  • Apple is reportedly working on something similar but has not yet been able to seal all the deals. Given that the Fire TV is Amazon’s most important device and Apple TV vs. Fire TV being the next platform battle how could Amazon not work on something similar? This is going to be a big differentiator.
  • This is a great proposition for the content industry. The industry wants neither Apple nor Netflix to become any bigger and more influental than they already are; while both keep growing nevertheless. Amazon is (and in video streaming has been for a while now) a great ally in this. It is a huge company with means for significant distribution, meaning Amazon can make a difference in the market. And it is able to make a difference now. Unlike, say, streaming services from traditional TV companies (studios, TV networks) or startups. Never underestimate instant gratification, even for Managers. Hence Amazon is in a good negotiation position (Amazon can just follow the lead of Apple or Netflix). Also according to Bloomberg the new service will “include its partners’ branding”. Logo branding, and Netflix denying this to its partners, is one important negotiation point between Netflix and content owners right now.1
  • Now the hard stance Amazon took with Apple TV and Chromecast makes completely sense. Amazon could build an Instant Video app for the Apple TV. But something like this new service would not be possible on Apple’s platform or the Chromecast.
  • Last not certainly least Instant Video is a main driver for Amazon Prime which itself is a main driver for Amazon’s e-commerce2 business. Increasing its video footprint makes a lot of sense for Amazon.

Some context on the US TV market: So-called ‘cord-cutting’ -leaving traditional TV cable for TV services via the internet- is lately becoming a real trend after being talked about for years. Now is the perfect time to bring an attractive TV bundle to the (US) market.

So even if this new service bundle will not be released by the end of the year you can be certain Amazon is working on something like this and that it is coming. If not this year then next year. It is just a matter of time.

More on Amazon’s TV strategy:

  1. This is one of those business aspects that makes perfect sense from all perspectives: the content owners, Netflix and Amazon. A micro-cosmos in which to see the present and future of all three parties. 
  2. If it were not for AWS one could leave out “e-commerce” here. But AWS is the from the e-commerce side more or less disconnected juggernaut that keeps on growing


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