The Industry

The OTT Super-bundler

Without making much noise about it, Amazon has become a super-bundler of OTT content. In addition to their own unique programming Amazon now carries programming from over 90 different channel partners. This creates some really interesting dynamics in the industry.

What makes Amazon a wildcard in the OTT business is that nobody knows how many Prime video customers they have. The growth of the Prime service has been explosive, but that service provides free shipping on Amazon with an annual $99 fee and Amazon doesn’t report how many of those members watch Amazon video. Industry analysts have estimated that there were 45 million Prime customers in 2015, 65 million in 2017 and probably 80 million by the end of this year. That huge overall customer base has the potential to turn Amazon into a bigger video provider than even Netflix, but unless the company begins disclosing video customers we may never know.

We do get some idea of Amazon’s market strength through its impact on channel partners. Recently BTIG analyst Rich Greenfield reported that Amazon is responsible for over half of the online sales of HBO, and almost all of the online content sold by Showtime and Starz.

That creates an interesting dilemma for HBO. The company directly markets its online product at $15 – the same price that is being marketed on Amazon. HBO has enough strength as a programmer that they also charge about the same cost to service providers on cable or fiber systems. But there is no doubt that Amazon extracts a fee for selling the service, and so HBO will make a smaller margin on an Amazon sale than through its other sales channels. This means that every time a customer cuts the cord on cable and instead comes to HBO through Amazon that the company loses margin. This is not likely to hurt HBO much and they are better off retaining customers – but Amazon profits significantly on selling HBO and other services due to its sheer market power and number of subscribers.

But HBO and the other programmers lose something more important than just a little margin – they lose a direct relationship with a customer. Amazon knows the customer, bills the customer, and also knows the customer’s preferences for watching video of various types. This knowledge has to be invaluable to Amazon.

The list of OTT providers on Amazon is impressive and it represents almost every OTT provider that is not owned by a big ISP. In addition to the premium movie services, Amazon carries just about every OTT provider you ever heard of – and many that you have not. Just to throw out a few names, Amazon carriers Fullscreen, Fandor, Curiosity Stream, Gaia, PBS Kids, Shudder, Motorvision.TV, Mubi, the Daily Burn, Heera, Acorn TV and many others.

A number of these OTT providers only sell through Amazon, so you won’t find them anywhere else on the web. Pretty much anybody that can gather together a pile of content can gain significant subscribers through the Amazon platform.

The way that Amazon markets these providers is interesting. If you are an Amazon Prime customer you can see the full list of its channel partners by searching for ‘Amazon Channels’. But Amazon doesn’t directly market any of the channels as a service, but instead only offers you the channel content based upon your search for content. If you want to watch a horror movie then your search results will include Amazon’s own content as well as content from the many channel partners. You may be offered content from Shudder, Screambox, Full Moon or XLTV without even realizing it. Somewhere in that search you will also be offered a subscription to these various horror channels.

It’s easy to think that we are seeing the growth of a vibrant OTT industry. But when you look a little deeper we are not. The industry really consists of Netflix and its huge pile of unique content, Hulu which is owned by the cable companies, a handful of resellers of standard cable channels like SlingTV, and Amazon Prime. Many of the channels on Amazon Prime offer direct subscriptions, but it turns out that almost all of their sales come through the Amazon platform and not directly through web subscribers. I find it interesting that a lot of the channels carried by Amazon offer a free 30-day trial to anybody directly on the web, but when purchased through Amazon customers always pay up front and are not offered the free trial. For many of the smaller providers 30 days is long enough to watch all of their content you care to see – but Amazon has instead monetized the interest in the content.

This makes a lot of sense for a content owner. They need virtually no advertising budget because the huge number of Amazon Prime customers can find their content by genre. And they don’t need to work through the issues of developing the physical network infrastructure necessary to provide web programming – that all gets handled by Amazon. But these channel owners also lose a lot. They don’t know their customers. In many cases people watch their content without even realizing that they are the content owners. But I guess the lure of selling to 80 million potential customers outweighs these concerns. It’s certainly a great deal for Amazon because they are gathering enough content to satisfy almost any potential video customer – without having to develop the content.

The Industry

So Many OTT Choices

I get asked by clients all of the time about how long they should stay in the video business. Most small providers are losing money on video and most of them are becoming less wedded to sticking with the product. By now just about everybody is familiar with Netflix, Hulu and Amazon Prime as alternatives to traditional cable TV. Additionally, there are now numerous skinny bundles like Playstation Vue, Sling TV, DirecTV Now, and soon those will be joined by YouTube TV and a new unnamed service from Hulu. It’s becoming a lot easier for people with good household bandwidth to cut the cord. But there are a lot more alternatives that don’t get as much press as the above options, and today I’m going to take a look some of the other choices. A cord cutter can put together an amazing array of content with a little work. Many of these networks offer free trials.

FuboTV. This was launched in early 2015 and carried mainly soccer. But the service has expanded to a 70 channel line-up that includes popular networks and is heavy on sports. They offer a wide range of sports programming to include the Fox Sports channels, the Big 10 Network plus a lot of off-beat networks that carry things like rugby, the European golf tour, motorcycle racing and boxing. The service comes with free on-line DVR storage.

Layer3 TV. This company is taking a different approach to everybody else. They are offering large packages at cable company prices for those that like the big packages but don’t like cable company customer service. They are not available everywhere yet. They offer 200 channels of HD programming and a lot of 4K programming, a great settop box, a high-capacity DVR, and integration with most social media and the promise of great customer service.

Sundance Now. This is a service that offers indie films, award winning foreign films and independent documentaries.

Curiosity Stream. They offer a number of non-fiction documentaries, heavy on science, technology, history and nature.

BritBox. This service from BBC Worldwide carries over 2,000 hours of British TV.

Feeln. This is a service that specializes in ‘feel-good’ movies.

Jazz & Blues TV. This features music documentaries and concerts.

Rooster Teeth. This is service that is popular with millennials and that grew out of a popular series Red vs. Blue from YouTube.

FilmStruck. They carry the kind of films that were shown on Turner Classic Movies.

Shudder. The service carries a big library of horror films. Don’t expect the blockbuster classics, but they seem to have everything else.

Fandor. This has been described as the service for film majors. It includes indie films, classics, silent movies, foreign films, documentaries and shorts.

SeeSo. Contains uncensored standup comedy.

Other Pay Streaming Services. There are new ones being added all of the time, but not included above are Acorn TV, ConTV, DramaFever, RabbitTV, Vid Angel, VUDU, Warner Archive and TV Land.

Individual Channels. You can also buy individual channels like CBS ALL-Access, HBO Go, Showtime, Starz, and the CW Network.

Free Programming. There is a mountain of free content available. This includes sites like AOL ON, Break, CollegeHumor, Crackle, CW Seed, Funny or Die, Itenu, Internet Archive, Mohu One, My Damn Channel, PBS, PlutoTV, PopcornFlix, Red Bull TV, ShareDots, ShareTV, Shout!, Simpsons World, SnagFilms, South Park Studios,, TestTube, The Onion, Tubi TV,, VEVO, Viewster, Vimeo and Yamgo.

Free News. This includes 60 Minutes All Access, Bloomberg, C-SPAN, CBS News, and NBC News.

I think the bottom line is that your customers can put together some amazing package of programming as an alternative to traditional cable TV. A customer could use rabbit ears for local stations and for $50 – $70 per month could do Netflix and a number of the above OTT products and have a great tailored programming package. And it’s likely that the online choices will be increasing. I have several clients who have dropped cable TV and who are glad about it. I think the above puts the writing on the wall and every small cable company ought to at least add this as a topic of company conversation.

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