Amazon Ups Its Game In The UK & Germany

Today Amazon announced that it is rolling out Amazon Channels in the UK. This is an add-on for Amazon Prime members which allows them to add premium video channels to their monthly subscription. The channels range from Discovery, Eurosport Player, ITV Hub+, hayu, MUBI, BFI Player, MGM, Hopster to Shudder or Heera (Amazon’s own Bollywood channel). Effectively, Amazon channels allow consumers to create their own streaming pay-TV skinny bundles.

Why This Matters

As MIDiA Research has identified in its report published this month entitled Why Netflix Is A Next Generation Network And Amazon Is A Next Generation Operator,  the future of the $250 billion pay-TV industry is wide open and ripe for disruption. Lucrative cable and satellite businesses are now facing existential disruption from emerging tech competitors able and willing to stream on demand video content on a contract-free basis.

With SVOD (Subscription Video On Demand) services less than a fifth of the cost of standard pay-TV packages, ARPU (Average Revenue Per User) is plummeting as the consumer increasingly switches to streaming pay-TV solutions. The result is a much more competitive marketplace for video content at just the same time as online video consumption approaches the mainstream (monthly online video penetration is forecast to reach 50% by 2019).

Alongside this, increased appetite for streaming is the paradox that, as the marketplace becomes more competitive, it is also significantly expanding. Populations that were excluded from the traditional pay-TV model are now able and increasingly willing to pay for access to premium video content. This is an opportunity which traditional pay-TV providers are institutionally and culturally ill-prepared to take advantage of. Traditional pay-TV is used to dealing with national and regional markets. Streaming pay-TV technology opens up the whole world as potential consumers of premium video services. Not only are the cable and satellite operators institutionally incapable of capitalizing on this global opportunity, they also present an opportunity cost for the TV networks that currently partner with them, as they are unable to deliver the audiences numbers which major tech platforms are now able to provide.

Amazon along with Google, Facebook and Apple are able to offer these audiences. Crucially for the networks, Amazon has no need to directly generate revenue out of their video content offerings, as their primary strategic focus is to bring new customers into their retail ecosystem. After its Dec 14th 2016 rollout, Amazon Prime Video is now available in 242 territories around the globe and has the world’s leading cloud service provider, Amazon Web Services, as a business division. It also has the existing billing relationships and brand equity mainstream consumers which are crucial to being successfully positioned as a next-generation TV operator.

Amazon Channels Is The Next Iteration On The TV Disruptor Journey

The channel bundle option is a clear iteration on the SVOD model which brings the streaming pay-TV model closer to being a direct competitor to traditional pay-TV. This, however, is not the end destination as the user experience is still sub-optimal in comparison to the curated TV viewing experience of traditional pay-TV. However, it creates the framework for mainstream consumers to start thinking about what they actually want out of a TV-like experience and also, crucially, what they are willing to pay to achieve that vision.