For now, Amazon isn’t doing much more than creating a way for Amazon users to manage multiple subscription services from a single billing and distribution hub — the same way that Apple does through its Apple TV box. (..)
But people briefed on Amazon’s plans say the company intends to package some of the services it is selling individually into different bundles, presumably at a discount from the normal per-channel price. So that could be interesting. So is the notion that it’s using Prime as a way to sell other third-party services — a new idea for Amazon.
Creating and reselling a new TV bundle consisting of streaming providers could eventually become a very lucrative endeavor for Amazon:
- Amazon essentially becomes a TV cable provider without having to build out the needed cable infrastructure.
- This would make the Fire TV an even more attractive device, growing the installed base and thus further supporting everything else Amazon will build on the platform.
- And again, coupling all or parts of this with Amazon Prime gives Amazon a great opportunity to further expand the bundle.
Revenues from this which would not be confined to U.S. only but could be rolled out internationally1, and thus could pretty fast far exceed Amazon’s current digital media revenue; and in the end the whole of its current media revenue.
On a sidenote, there is an interesting discussion around exclusive content deals going on, around the NFL in the U.S. to be precise. Peter Kafka at Re/code:
TV may be in decline, but it’s still huge. And the biggest thing on TV is the NFL. Which is why the upcoming auction for the NFL’s slate of Thursday night games is going be fierce. Most of the big broadcast networks, and at least one cable network, want in, and the price tag for the 16 game series — currently shared by CBS and the league’s own NFL Network — could be in the $600 million-a-year range…
So what if you were a big, cash-rich technology company that wanted to upend the TV business? Wouldn’t those same NFL games be attractive to you? Yep! Which is why some big, cash-rich technology companies may be considering making their own bids for the games.
To which Ben Thompson writes at Stratechery (paywall):
The tech company that makes much more sense to me is Amazon. As I’ve noted multiple times Amazon Prime members buy significantly more often from the service. How many new Prime customers could Amazon bring in if the NFL was part of the allure? Moreover, Amazon is the least international of all the big tech companies: they do have significant operations in Europe and Japan, but their strongest European operations in particular happen to be in countries that are actually somewhat interested in the NFL, particularly the United Kingdom and Germany.
Still, I’m not convinced here either; I’ve already written that I think Amazon is transitioning to a membership based revenue model, wherein they sell more and more things at cost and make their margin from an annual membership fee. Eating into that fee revenue to the tune of hundreds of millions of dollars for a rights fee that reaches customers the company already has may not add up.
It is an interesting thought experiment. I also don’t think this would make sense for Amazon. For one, the NFL is very much U.S. centric content even if there are a few interested sport fans here or there in countries like Germany. But more importantly, for $600 million one can produce a lot of original scripted content and this is a far better investment long term filling up the back catalog with exclusive rewatchable content.
But that said, a sports deal, no matter wether with Apple or Amazon, could significantly tip the scales towards streaming and away from traditional TV. And this would help both companies: The less strong the traditional cable bundle, the better the negotiation situation for tech companies seeking out new content bundles on top of their streaming boxes.
For that matter, ‘cord-cutting’ -leaving traditional TV for online streaming- is accelerating in the U.S. according to the Wall Street Journal.
- Like Netflix and Instant Video are expanding internationally, so can a bundle around streaming providers. ↩