Analysis: Amazon Channels
The launch of Amazon Channels in the UK and Germany represents a new type of aggregator for Europe: a kind of super-app in which a collection of OTT apps (plus some browser-based online video services) are made available in one place through a common brand with some unified content discovery, with subscription fees taken care of via common billing (Amazon Prime).
But while Amazon Channels may be a super-app (or a super-video website), it is not a ‘super-aggregator’.
That tag should be reserved for media companies who gather not only online apps but the world of linear channels into one place – and traditional Pay TV operators are better placed than anyone to pursue that opportunity.
The difference is currently clear but could eventually blur. From the traditional Pay TV world, Virgin Media, which is a good example of a super-aggregator, has all the best free-to-air broadcast groups and Pay TV content owners onboard with their linear channels, plus access to catch-up TV and VOD, and a growing selection of OTT video services (apps) like Netflix and Hayu (the specialist reality TV online portal from NBC Universal).
You do not have to provide common billing for the traditional Pay TV content and the OTT services to classify as a super-aggregator, but that will add value for consumers. In the case of Virgin Media, Hayu is bundled into the Pay TV bill (subject to which package you take), whereas Netflix users watching via a Virgin set-top box pay for that service separately (direct with the OTT provider).
Most free-to-air content and Pay TV channel groups are missing from Amazon Channels at launch, and until that is rectified it is hard to view this a meaningful threat to traditional Pay TV offers. At this point it does not look like much of a threat to Pay TV Lite (skinny bundle) services that existing platform operators offer, either.
In character, Pay Lite services are more like a ‘traditional’ Pay TV bouquet (but with fewer channels, streaming rather than broadcasting, lower prices and zero contract commitments) than the app-of-apps that Amazon Channels is (to be slightly more accurate, Amazon Channels is a collection of paid services that exist independently online as websites and, in most cases, as websites and apps).
Technically it would not take that much for Amazon to move closer to the Pay TV Lite model. An EPG brimming with directly-streamable linear channels from the best content owners would do the job. But the big question is whether content owners want these different types of platform to compete directly.
As it stands, Amazon Channels creates yet another distribution and commercial model that could appeal to yet another segment of the paying audience – this time consumers who like their content owners unbundled, paid for on an a la carte basis, but through a common ‘umbrella’ service. At least two major analyst firms are relaxed about the likely impact of Amazon Channels on the traditional Pay TV market, with one expecting it to play a new and distinct role in the market.
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Ampere Analysis has previously observed that while Netflix repositions itself as a premium channel play, Amazon wants to be a platform operation, and Daniel Gadher, Senior Analyst at the company, recently linked the launch of Amazon Channels to the trend towards homes taking multiple SVOD service subscriptions – what Ampere calls ‘SVOD stacking’. The company says a key factor behind SVOD stacking is the proliferation of thematic and niche SVOD services.
“The recent launch of Amazon Channels in the UK and Germany aims to take advantage of this trend, providing consumers with the opportunity to subscribe to over 40 different SVOD services via an Amazon Prime account, making stacking services even easier,” Gadher observes.
He says the thematic and niche SVOD services are individually small but collectively increasingly important. Amazon Channels (and initiatives like it) will start to become an important avenue for niche SVOD services who lack the brand power or visibility of companies like Showtime or Starz to grow, he believes. “Amazon offers a very visible consumer-facing buy-through route for the players on its platform.”
Ampere research shows that in the U.S., niche services benefit more from integration into Amazon’s Channels programme than more mainstream players. Perhaps more importantly, when working out who Amazon Channels will appeal to, the company assessed a selection of niche and mainstream subscription OTT services available within Amazon’s Channels offer. It found that customers of the more niche services were much more likely to also take Amazon Prime than those of the mainstream services, who were proportionally more likely to subscribe direct.
IHS Markit, another information and analysis provider, believes the Amazon Channels target audience will be those customers who do not have a full Pay TV subscription but who are looking to boost their current viewing with content from branded and specialist channels.
The company thinks the best way to describe Amazon Channels is as a Pay TV Lite service that offers subscription content on an a la carte, unbundled basis, but it does not view this new service as a serious threat to traditional operators.
“It is hard to see the service as an alternative to the Sky packages available in Germany and the UK and cable offerings like Virgin Media and Kabel Deutschland,” an analyst note from Jonathan Broughton, Senior Analyst, Home Entertainment, and Tim Westcott, Senior Principal Analyst, Television Media, said. IHS Markit says the number of people that would give up a Pay TV subscription to take Amazon Channels is small.
These two analyst firms also focused on the role of bundling and discounting when making their judgements. Broughton and Westcott (IHS Markit) said: “By bundling channels together, Pay TV operators can offer consumers a wide range of services at a low cost per channel, offering the providers a cut of subscription fees.
The pricing of Amazon Channels does not offer a strong incentive for customers to build their own bundle given that no discounts are available; a selection of channels equivalent to a basic Pay TV package will cost more than £30 on top of Prime fees.”
Gadher (Ampere Analysis) says the a la carte model that Amazon has adopted is theoretically attractive for consumers, offering them an opportunity to pick and choose the services they want. “But it is also a model which has been tried in the past in the Pay TV market and ultimately discarded in favour of packages of channels, frequently better at driving upsale.”
None of this should detract from what Amazon has already achieved with its bold vision of what an online aggregator can be. The company has convinced Discovery to break loose of traditional Pay TV bundles to make its content available in what amounts to a direct-to-consumer offering, albeit aggregated within the Amazon world. The fact that ITV has allowed its ITV Hub+ player/streaming service (the advertising-less subscription version) to be part of the service lends credibility, too.
Amazon is the talk of the industry right now, the way that Netflix was a few years ago. Part of the reason is the belief that the company has even deeper pockets than its Los Gatos rival and can fund its TV ambitions, including its increasing spend on original content, with what amount to cross-subsidies from its giant retail arm. The Amazon goal, according to this theory (often repeated at conferences), is that television is just another carrot to grow the Amazon Prime subscriber base, which itself is a sticky service that drives people to buy more (other stuff) from Amazon.
Using television to drive something bigger is not new, of course. IPTV was born out of the need for telcos to tie broadband and phone subscribers into a more sticky bundle. Most cable operators are happy to admit that the serious profits are made from broadband, with TV delivering much lower margins but still essential as the magic stardust in the triple-play or quad-play. If video works half as well at drawing consumers towards Amazon retail, and keeping them there, as it did for telcos selling broadband, then it is hard to see Amazon doing anything but grow their offer.
During a ‘NEXT Generation TV Forum’ in June, hosted in London by a selection of television, networking and OTT vendors (Encompass, Harmonic, Kaltura and Nokia), Amazon’s impact in the television market was high on the agenda. Daniel Webster, VP Media Customer Success at Kaltura, the online video platform and OTT technology provider, noted the growing strength of Netflix and Amazon in the U.S. and how the latter had a more diversified business model.
“Amazon can afford to do this continuously [spend big on content] with practically no consequences because of the loyalty of their stockholders,” he warned. Pay TV companies are going to face a big challenge from them, he reckons.
In the U.S., Amazon Channels gives Prime members access to over 100 subscriptions that can be added to their membership, including HBO, Showtime, Starz, Cinemax and PBS Kids. The UK and German launch was announced in May, with a big focus on the absence of bundles and a la carte pricing.
“You pay only for what you want. Amazon Channels allows Prime members to add channel subscriptions for a low monthly subscription fee, available individually without the need to sign up for a bundle or enter a lengthy contract,” the company declared.
Individual subscriptions are as little as £1.49 per month and you can cancel anytime. There are free trials on the majority of services.
The three really big wins for Amazon, in terms of content, were the availability of Discovery’s documentaries and unscripted entertainment for £4.99 a month, Eurosport Player (with live and on-demand sports) for £6.99 a month, and ITV Hub+. Other notable inclusions are Hayu (at £3.99 a month) and Shudder, the AMC Networks service focused on thrillers, suspense and horror (£4.99 a month).
Another key message from Amazon is convenience: “One Prime Video app, one Amazon account, no need to switch between multiple accounts, plus unified search, browse and Amazon recommendations,” the company told the world. All ‘Channels’ are available via the existing Prime Video app to watch on Smart TVs, iOS and Android mobile devices, Amazon Fire TV, Fire TV Stick, Fire tablets, games consoles and browser.
Amazon Channels does not only aggregate different online services into one place; it also aggregates content assets from across these services into what amounts to a content guide or shop window. As you can see from the photo (showing the PC-based version in the UK) ‘channels’ are listed one below the other and available movies or programmes are then shown in a row from left to right. There is a flexible approach to how you then pay for the content.
In the case of ITV Hub+, for example, you can click on ‘The Durrells’ (a gentle drama about expats in Greece) and find options to buy an episode for £2.99, the whole season for £12.99 (both in HD), take a seven-day free trial for ITV Hub+ or subscribe to the service for £3.99 a month. Then you get the content advertising-free.
Hayu offers a similar set of options if you select its programmes. Meanwhile, if you want to watch Brad Pitt in the movie Moneyball, which gets a promotional splash at the top of the Amazon Channels homepage, you can sign up to MUBI for £5.99 a month, take a free trial or rent or buy the film in either SD or HD (SD rental is £2.49, HD rental is £3.49, SD purchase is £3.99, and HD purchase is £5.99).
Below the main promotional splashes are some secondary content promotions and this week one of those options is the AEGON Open Tennis on Eurosport Player. If you subscribe to this channel (at £6.99 a month – free seven-day trial available) you can then watch Eurosport 1 and Eurosport 2 live (with Eurosport 1 showing that tennis, from the Queens Club (the traditional warm-up tournament for Wimbledon). Amongst the on-demand content is the Mercedes Cup (ATP World Tour) tennis from Stuttgart (played last week).
If you already have your subscriptions in place and know what you want to find, you can get to live tennis on Eurosport within two clicks on a PC, take a single ‘back arrow’ action to return to the Amazon Channels home page, scroll half a page to ITV Hub+, make six sideways clicks and access ‘Britain’s Got Talent’, then press ‘play’ to watch season 11, episode 18. Pressing ‘stop’ takes you back to the ‘Britain’s Got Talent Season 11’ page where you can scroll dowwards through the rest of the series (episodes 7-18 available for viewing).
This amounts to a relatively quick way to reach the content you subscribe to from the 34 channels listed. These homepage choices are limited of course, so each channel has a ‘See More’ option that takes you to the channel homepage, with each of these designed in exactly the same way as the Amazon Channels homepage. Wherever you go there is a menu bar at the top with an Amazon Video search window.
One of the proudest boasts from Amazon is that Amazon Channels is the first place that some channels – notably Discovery – have been made available independently of any bundle. “That enables customers to only pay for the premium TV they want to watch,” the company points out. Alex Green, MD, Europe at Amazon Channels, declared: “Amazon Channels gives power back to customers to choose exactly what they want to watch.”
Some of the less well-known services that make up Amazon Channels are:
– Alchemiya – Films and documentaries about Muslim culture and life, costing £3.99 a month
– BFI Player+ – On-demand classic British and critically acclaimed movies for £4.99 a month
– Daily Burn – On-demand and live workouts including dance, strength training, yoga, cardio and more (£9.99 a month)
– Horse & Country Play – Described as ‘The home of equestrianism and British country lifestyle’, on-demand for £3.99 a month
– Heera – An Amazon-exclusive on-demand channel with over 600 Bollywood, Bengali, Marathi, Tamil, and Telegu movies and series including blockbusters like Sultan and Kabali for (£3.99 a month)
– Hopster – Ad-free content for kids at £3.99 a month
– MGM – Movies covering Hollywood hits, timeless classics and cult favourites, for £4.49 a month.
Paolo Pescatore, Director of Multiplay and Media at the market intelligence firm CCS Insight, takes a different view to IHS Markit in terms of the potential impact this new service could have on traditional TV operators. He calls Amazon Channels, “a highly disruptive move and one that threatens Sky’s dominance in the Pay TV market both in the UK and Germany.”
He adds: “Beyond free-to-air services, the addition of Discovery’s channels is hugely significant. This is the first time that its channels have been made available outside of the Sky universe and out of a bundle.
“In our opinion, this will force many households to think twice about their Pay TV subscription and cut the cord, as we have seen in the U.S, especially if Amazon will add more live TV such as sports in the future.”
Pescatore believes Amazon Channels is a sign of where the online video world is now heading, which is towards more aggregation. “This [launch] aligns with our prediction that the move to Internet delivery of TV programming will see a return to large bundles of content.
“There has been a rush towards online video services and so-called skinny bundles, accompanied by a proliferation of separate apps for each provider. But in reality customers will not want to sign up to numerous services, receive more bills and be forced to open several apps to find the content they want.
“In our view, the disparate and disjointed nature of these apps will lead frustrated customers to re-engage with big content bundles delivered over Internet connections.”
Amazon Channels provides an important alternative distribution option for content owners. Broughton and Westcott at IHS Markit comment: “For many content owners and channels in the market, Amazon now offers a convenient way to deploy the equivalent of a D2C [direct to consumer] channel without the need to set up infrastructure, develop apps and portals, or even deploy a billing platform. The promotional benefit of Amazon’s massive retail shop window is also important.”
They also note how Amazon is limiting its own exposure to risk, too. “Amazon Channels represents a wide range of content and genres without requiring the platform to directly take on risk, or perform detailed analysis of consumer demands.”
Gadher at Ampere Analysis believes we could now see more aggregation within this new aggregated environment. “As the Amazon Channels initiative continues to expand and the number of channels grows, making it once again hard for one service to stand out from the crowd, the more niche players may find that banding together in subscription packages is the logical next step,” he suggests.
Rick Young, VP of Global Products Management at Encompass Digital Media, which provides a wide range of broadcast/video services from uplink/downlink to channel playout and event streaming, believes there will still be room for niche content owners and networks who want to operate their own standalone apps, but they may use this approach and Amazon.
“Thanks to the technology options out there, it is possible to put up an affordable platform that enables a single content owner to find a business model,” he told the NEXT Generation TV Forum. But he added: “I think [Amazon Channels] will be a must-go place to put your content. You have to put content where viewers want it and where it can be found.”
Amazon makes no secret of how it is building out the value proposition for Amazon Prime. “Along with access to thousands of popular movies and TV episodes through Prime Video, Amazon Channels joins the growing list of benefits for Prime members including unlimited one-day delivery, Prime Music, Prime Live Events, Prime Reading, Prime Photos, early access to Lightning Deals and more.”
IHS Markit thinks it is likely that Amazon will see a modest increase in the number of Prime subscribers as a direct result of deploying Amazon Channels.
However this service develops, it is already the most significant launch in Europe this year because of what it represents. Amazon Channels is a new kind of aggregator, with admittedly limited content today, from an online giant that has the resources to get really serious in television if it wants to.
John Moulding is the editor-in-chief of Videonet, where this article first appeared.