The company doesn’t come as a packager of TV networks -- like a cable, satellite, telco, or virtual/digital service -- but as an a la carte seller of TV networks.
BMO Capital Markets says Amazons Prime Video Channels -- a subscription OTT service, where consumers can pick and choose networks, such as CBS All Access, HBO, Showtime and others -- could represent 25% to 45% of total OTT users for specific channels Amazon offers.
This year, Amazon pulled in gross subscription revenues totaling $1.7 billion, according to estimates. Of that amount, $1.2 billion went back to those individual program services. That means Amazon kept around 30% of those revenues -- $500 million.
In two years, Amazon’s gross revenues could rise to $3.6 billion, says BMO, with Amazon partners getting around $2.5 billion, and Amazon keeping $1.1 billion.
These are big numbers for the OTT networks, estimated to be a much better deal on a per-subscriber basis than what they get from traditional pay TV providers, and/or their virtual pay TV services.
Right now, Amazon has around 40 million U.S. subscribers and 75 million worldwide. Globally, this could expand to 100 million by 2020, according to BMO.
Customers can buy individual channels on Prime Video Channels -- on a pure a la carte TV network purchase. Networks like HBO ($14.99 a month), Showtime ($8.99), CBS All Access ($5.99), Hallmark Movies Now ($5.99), Starz ($8.99); Curiosity Stream ($2.99) and Sundance Now ($6.99).
On the downside, Amazon doesn’t have a full complement of big TV networks. Apart from HBO, Showtime, Starz and CBS All Access, the majority consists of small, niche TV networks.
There is DocComTV ($2.99 per month); Smithsonian Earth ($3.99 per month); Reelz ($3.99 per month); Daily Burn ($14.99 per month); PBS Kids ($4.99 per month); Shudder ($4.99 per month); and Cheddar ($2.99 per month)
Still, Amazon is in no rush; it has the wherewithal to wait. Prime Video Channels revenue amounts to less than 1% of all Amazon’s ecommerce business revenues, estimated to be a massive $232 billion for 2018.
What Amazon has to offer is a better revenue share for many TV/OTT networks and more flexibility than Sling TV, DirecTV Now, PlayStation Vue and fuboTV.
Those virtual pay TV networks still follow a traditional pay TV model. Amazon looks to break the mold. Will others join up?