How Amazon is Becoming a TV Powerhouse

Amazon Video Direct

The new self-service video offer Amazon Video Direct is an important next step in the online retail giant’s ongoing journey to becoming a TV service juggernaut.

The business of selling plastic discs is, sooner rather than later, coming to an end.

That is looking at Amazon’s newest video expansion, Amazon Video Direct, as a defensive move. As a way to protect the media business by evolving the business model around it. But may be more to it than that?

Amazon Video Direct is the new self-service branch of Amazon’s expanding video empire. From the press release:

With AVD, starting today, video providers have flexible self-service options for distributing their content:

  • Included in Prime Video at no additional charge to tens of millions of Prime members
  • Available as an add-on subscription through the Streaming Partners Program
  • Offered as a one-time rental price or a one-time purchase price
  • Available to all Amazon customers ad-supported

Specific benefits of Amazon Video Direct include:

  • Access to Amazon’s most engaged streaming audience—video providers can distribute their content directly to tens of millions of Prime members and earn royalties based on minutes streamed
  • Choice of how to share titles—video providers can utilize the different options Amazon Video uses to share content to customers
  • Expanded customer reach—video providers can choose to make their titles available in any country where Amazon Video is available—the United States, Germany, Austria, United Kingdom and Japan; with support for all the devices Amazon Video is available on—Fire TV, Fire and other iOS and Android tablets, connected TVs, game consoles, iOS and Android phones, and laptops
  • Insightful performance metrics—video providers are given performance metrics, such as number of minutes a title was streamed, projected revenue, payment history, or number of subscribers, so they can optimize the way they offer and promote content to customers; video providers have full control and the flexibility to make changes based on these metrics

Not a YouTube competitor

Variety, Bloomberg and Recode are just a few of many comparing Amazon Video Direct to YouTube. It is an understandable comparison but a misleading one. This is not aimed at consumers uploading videos of their toddlers and the likes. And this is not going to create the same kind of network around video. (yet)

Amazon is as clear as the company can be about what this new video service is and towards whom it is aimed. Bloomberg:

The Seattle-based e-commerce giant said the service is designed for “professional video producers,” but its only requirements are that the videos be high definition and have closed-captioning for the hearing impaired.

And Variety:

Amazon will pay partners 50% of the retail price for digital purchases, rentals and subscription fees. If they choose Prime Video distribution, creators will earn royalties of 15 cents per hour streamed in the U.S. and 6 cents in other territories (capped at $75,000 per year) under the standard terms.

At launch, AVD partners include: Conde Nast Entertainment, HowStuffWorks, Samuel Goldwyn Films, the Guardian, Mashable, Mattel, StyleHaul, Kin Community, Jash, Business Insider, Machinima, TYT Network, Baby Einstein, CJ Entertainment America, Xive TV, Synergetic Distribution, Kino Nation, Journeyman Pictures and Pro Guitar Lessons.

It is a service for professional creators and rights holders, who, for lack of a better term, represent the Long Tail of video content.1

Amazon Video Direct is better compared, then, to self-publishing for Amazon Kindle: Kindle Direct Publishing.

Video and text publishing should not be compared to closely, as the underlying cost structures and thus arising dynamics are very different from each other, but this graph shows a clear trend in e-book publishing. (For Kindle at least.)

unit-sales-trend-20160110

Looking at the popularity of YouTube and Amazon’s own Twitch, the general trend for video almost certainly won’t be looking too differently.

So, the opportunity for Amazon with video is similar to e-books and Kindle. With a self-service offering Amazon can now target those publishers and creators who may be interested in an income stream based on streaming but who are too small for Amazon to negotiate directly with.

For those publishers, Amazon just introduced a bouquet of options to choose from.

This is more important than it looks. Making it easy for those creators to choose between selling, renting, revenue splitting with ad-financed streaming or usage based (with integration in Amazon Prime Video), gives the video publishers the freedom to choose what model they want to go with.

This in turn means it is going to be hard to argue why not to be present on Amazon with one’s own video content.

Once the video content is at Amazon, it is Amazon’s turn to push/entice every creator to whatever model suits Amazon best. Remember, everything from offering video for renting to being part of Amazon Prime Video is just another checkbox within the same dashboard.

The International Angle

There is one angle here that most observers overlook. Amazon, being in the position the company already is in, can with this new one-stop shop for small video publishers and creators more easily craft a compelling video offering internationally. Local rights holders outside the US can make their content easier available on Amazon.

Another comparison, in this aspect, is Amazon’s marketplace. Amazon’s marketplace makes sure Amazon as a whole can cover more ground. It also means that Amazon, due to the marketplace’s size, can gather important market data. By now it is well known that Amazon likes to incorporate popular marketplace products into the company’s own inventory. Something similar might be in store for video.

Why not bring popular local video content into Amazon Prime Video? (and thus making the streaming service more attractive internationally)

For this to work, Amazon needs to be as attractive to video creators as possible.

Again, Variety:

Amazon’s pitch to video creators: They can now get exposure to the site’s millions of online shoppers, with the flexibility of picking among several different paths for making money. (…)

StyleHaul, the fashion video network that has built its business on YouTube, said it will bring a selection of its original series to Prime Video, including fashion drama “Vanity” starring Denise Richards. “We believe Amazon Prime members will enjoy the unique female voices featured in our content and be inspired by the fashion and beauty that our brand embodies,” said Mia Goldwyn, chief content officer of StyleHaul. (…)

The company also said it will provide detailed performance metrics, such as number of minutes a title was streamed, projected revenue, payment history and number of subscribers, and that video partners will have full control to make changes based on the data.

While Amazon Video Direct is not a YouTube competitor, it is, in some respect, a competitor to YouTube Red. And, more important than that, this is going to compete with YouTube on the creators side. It is not the casual video uploader Amazon Video Direct is going after but rather the ones whom we call “YouTube stars”.

Unique

Indeed, why not bring popular local video content into Amazon Prime Video?

The more attractive Prime Video becomes the more adoption for Amazon Prime it drives.

This is the one very unique aspect that is very exciting about this latest video expansion: How is it going to feed into the evolving Amazon Prime bundle?

The other very unique aspect is what Amazon is building in general in the video space. The company has a large subscription streaming service with Amazon Prime Video and is now the only company which also has a self-serve program connected to it. With Fire TV, Amazon also has the hardware and OS/app store platform to play this on.

It should be clear by now that Amazon is serious in trying to take over the largest screen in our homes: The TV.

And no other company is coming close to what Amazon is offering today. Apple has a large installed base of Apple TVs but nothing else (yet).2 Google has YouTube but no hardware and OS to go beyond the app level; and YouTube Red is still in a very early stage. Netflix is Netflix.

Amazon may not offer the best in any specific category but the company is the only one offering everything under one roof, as integrated as it gets. Going forward, Amazon has a lot of options to evolve and create new levers. (Yes, this should concern the TV industry.)

This is looking at Amazon Video Direct as an offensive. Going from plastic discs to streaming means more freedom in shaping the business model. And Amazon is putting that freedom to good use.

More on this topic:


  1. To be more precise, they represent the middle part of the distribution curve. 
  2. Apple has the OS (tvOS) and iTunes but no subscribtion-based streaming service of its own. There are rumors Apple is going to launch a subscription service and it certainly might. But Apple will almost certainly never offer something similar to Amazon Video Direct. 

3 comments

  1. Johannes · ·

    The graph showing ebook sales by publisher is very interesting, because it reminded me of the recent reports of ebook sales going down for the first time (e.g.: http://www.theguardian.com/books/2016/feb/03/ebook-sales-falling-for-the-first-time-finds-new-report). This makes it seem like a proper headline for this Guardian article would have been “Big 5 publishers drastically losing marketshare in an overall rapidly growing ebook market”

    Like

    1. The shift within the e-book market certainly makes sense. Given the fact that this market is very much dominated by Amazon and that Amazon is offering self publishing tools most authors don’t need to go with the traditional model. (And on the other hand there are even more reasons for the big publishers to keep trying to emphasize their print business.)

      Like

  2. […] How Amazon is Becoming a TV Powerhouse […]

    Like

%d bloggers like this: