Why Amazon Is Going After Netflix


When Amazon enters an industry,
incumbent companies usually freak out. Whether it’s pharmaceuticals, groceries,
cloud computing or just old-fashioned retail, Amazon has earned
its reputation as a business bulldozer. But when it comes to video,
Amazon has so far been content with just being a player, not the player. I think Amazon Prime Video has spent a
lot of money and has very little to show for it today. But that may be changing. For years, Amazon has used video as
a sweetener for people to subscribe to Amazon Prime, the
company’s $119/year service. A Prime subscription includes not just
TV shows and movies, but shopping discounts, access to music and books
and, of course, free shipping on Amazon deliveries. At first Amazon’s video strategy was
to buy high-minded content, that could win Hollywood awards. Shows like ‘Transparent’
and ‘Marvelous Mrs. Maisel,’ and movies like ‘Manchester by
the Sea’ and ‘The Big Sick.’ Under Roy Price, the former head of
Amazon Studios, Amazon had some success with this strategy. ‘Transparent’ won the Golden Globe for
best musical or comedy series in 2015 and ‘Manchester by the Sea’ won
the Academy Award for best original screenplay in 2017. But those hits still
had relatively small audiences. When Roy Price left Amazon in late
2017, Amazon CEO, Jeff Bezos, decided to replace him with Jennifer Salke,
a broadcast TV veteran. Salke changed Amazon’s video strategy to
look for content that appeals to broader audiences. This better matches up with bringing
people into the Prime universe and keeping the ones that
are already there. I think you’re going to see
Amazon go after big, broad content. Obviously, the most obvious example of this
is they’re doing ‘Lord of the Rings,’ and there’s no bigger, broader
opportunity and shot on goal than doing a ‘Lord of the Rings’ TV show. Amazon bought the rights to ‘Lord of the
Rings’ in 2017 for a cool $250 million, the biggest amount ever
spent on TV rights. Amazon plans to run at least five seasons
of the series and has promised a campaign to promote the
show alongside J.R.R. Tolkien’s books on Amazon.com. Amazon now has more than
100 million Prime subscribers. With so many credit cards already on
file, it makes sense for Amazon to shift the purpose of Prime Video
to connect content with commerce. Unlike Netflix or HBO, Amazon can
market its content within an Amazon search for merchandise. Already today, a search for ‘The Hobbit’
doesn’t just show you the book, but also gives you a chance to
subscribe to watch the movie on Prime Video. Amazon’s next big splash could
be sports, particularly live sports programing. The company has already
acquired some streaming rights to Thursday Night Football and Premier League
soccer games, but it’s yet to land a huge, exclusive
sports rights deal. That could change in the coming years as
rights to the NFL, the NBA and Major League Baseball come
up for grabs. Amazon looks at content creation through
a very different lens than a traditional media company. A traditional media company is, ‘well
how much advertising can I generate from this?’ Amazon, the first thing when they talked
about the NFL, the number one metric they were looking at
is new to Prime. Meaning new people that have come
into the Prime ecosystem because those are people that spend a lot more over
the year than people who are not part of the Prime ecosystem. The major U.S. professional sports organizations might be a
little hesitant to sell their exclusive rights to a
non-traditional player like Amazon. But connecting commerce to content could
make them a lot more revenue. This is not just about showcasing
football games on Thursday night. This is selling you a jersey. This is potentially selling
you a ticket. There’s so much more that Amazon can
do than just simply stream a game. They can probably sell advertising better
than any TV network because of the data they have and they
know exactly what I like. They know I’m a Giants fan. The bigger battle beyond just content
could be ownership of the home. Seamlessly connecting Amazon Echo to
TVs and mobile devices could revolutionize how people find
shows and movies. Getting the ‘Grand Tour’
from Prime Video. There is an all out war for
the control of your media life. Home, car, on the go. This is war, and I think the reality
is these big tech platforms, who have valuations, and market caps and cash
piles that are massive relative to traditional media, they’re
just getting started. So far, Apple and Amazon
really haven’t gone toe-to-toe. But as Apple also gets into
original content, that competition is coming. There is going to be a war. It’s gonna be all of these
tech platforms feasting on the challenges facing legacy media.

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