An international launch of an Amazon TV service is “imminent”, according to analysts.
The retail giant’s Prime Instant Video service is currently available in the UK and Ireland, Germany and Austria and Japan, as well as its domestic US. It has recently looked to add channels to its video offering in the US via a Streaming Partner Program, and that move suggests an wider international move is in the offing, according to research house Ampere Analysis.
“We believe the recent launch of the Streaming Partner Program [SPP] in the US suggests Amazon is looking further, eyeing the international pay TV market,” Ampere said in its latest research on the company.
“SPP now contains 46 partner subscription services in the US from players including premium veterans Showtime and Starz, as well as newer standalone OTT offers such as A&E’s History Vault, NBCU’s comedy service Seeso, and niche SVOD plays like CuriosityStream, AcornTV and Shudder. An international launch appears imminent.”
Amazon would only need to add between seven and eight million new Amazon Prime customers to justify spending US$1 billion in a year on acquiring video, according to Ampere.
It estimates that there are now 60-70 million Prime subscribers worldwide, who are responsible for more than one third of inbound spend on Amazon’s retail business.
Due to Prime customers’ increased likelihood to buy products, the research firm predicts that Amazon can “extensively subsidise content acquisition” by up to US$130 per new or retained Prime customer each year.
“Ampere calculates that the incremental income effect of upgrading an existing customer to Prime ranges from US$100-US$130 a year. Adding an entirely new customer to Amazon’s systems could be worth as much as US$160,” the research house said in a note.
“This means that for every US$130 that Amazon spends on content there will be no net negative effect on retail income after sales and fulfillment costs – providing it can either sign up a new Prime customer or retain an existing one.”
The research estimates that nearly US$12 billion of Amazon’s US$15 billion retail revenue growth last year came from Prime customers, and that as much as 40% of Amazon’s retail growth in 2015 can be attributed to consumers upgrading to Prime and spending more with Amazon than they did previously.
“Simply put, Amazon can justify spending on content that supports adding and retaining Prime subscriptions because these customers spend over twice as much on other items,” said Ampere Analysis director Richard Broughton.
Ampere claims that with the recent launch of Amazon’s Streaming Partner Program (SPP) in the US, it is also “looking further, eyeing the international pay TV market”.
“The significance of the SPP goes far beyond the retail uplift incentives that the core Prime offer drives. At Ampere, we see it as an early à la carte next-generation pay TV offer,” said Broughton.
“New services are being added regularly, and we believe it is only a matter of time before these are bundled into larger and more expensive packages – akin to traditional pay TV tiers.
“While Prime allows Amazon to subsidise content acquisition, the retailer is also slowly building out what could very well be the template for future pay TV services.”
Amazon recently announced the launch of Amazon Direct Video, a video platform that could better equip it to fight the likes of Netflix and YouTube.