Amazon To Launch Cheap Video Service To Rival Netflix

Amazon is reportedly preparing to expand its offerings in the streaming-video market with an ad-supported service that would directly challenge services such as Netflix and Hulu.

The service, to be launched early in 2015, will be separate from the video services offered under Amazon Prime, and will use advertising support to undercut rival services, according to The New York Post, which cited unnamed sources. Netflix currently charges $7.99 (£7 in the UK) per month.

Wider user base

Amazon intends the ad-supported video service as a way of reaching a wider base of users that may later be sold Prime memberships, which cost $99 per year (£79 per year in the UK), a source within the ad industry told the Post.

The Wall Street Journal reported in March that Amazon was considering an ad-supported video service, but at the time those plans were not definite.

Amazon does not disclose the number of Prime members or the user base of its existing video service, but Prime is estimated to have about 50 million users worldwide, with the video service used by about 25 million, according to RBC Capital figures cited by the Post. Netflix has 33 million subscribers in the US.

Amazon currently accounts for about 2.58 percent of all traffic on US fixed broadband networks, compared with 32.39 percent for Netflix.

The fact that Amazon and Netflix tightly control their own viewership figures currently gives them significant leverage when negotiating licensing deals with television and film studios, and would also seem likely to provide leverage in negotiations with advertisers.

Independent ratings

The situation is to change in December when ratings firm Nielsen is due to begin offering independent ratings for the streaming video services offered by Amazon and Netflix, according to a Wall Street Journal report last week.

The ratings service doesn’t need approval by Amazon or Netflix, analysing the audio component of a program to identify what programme is being streamed, according to the report. However, it doesn’t yet extend to mobile platforms.

The move could give studios more bargaining power, while also helping advertisers feel more comfortable with an Amazon ad-supported video platform, according to industry observers.

Amazon is also planning to expand its existing ad-selling business to more directly challenge Google, according to an August report.

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