Amazon.com -- which has disrupted book publishing and retailing, among other industries -- now may be looking to rattle the cages of the pay-TV biz.
The e-commerce colossus has approached entertainment companies about licensing TV channels for a broadband-delivered service, the Wall Street Journal reported. Amazon did not respond to a request for comment.
"Today's MVPDs (multichannel video programming distributors) are designed to generate a profit but there is ample room for new companies to run at a lower margin or in the case of AMZN price at cost to generate revenue from the sale of merchandise sold through the TV," the analysts speculated.
Amazon's Prime $79-per-year free-shipping membership program, it's worth noting, includes unlimited access to streaming video, including the original series from Amazon Studios. The Prime Instant Video service is, in a sense, a value-added offer to encourage Amazon shoppers to buys more products.
Amazon is uniquely positioned to enter the pay-TV business, the analysts said, because it already operates a large technology infrastructure -- Amazon Web Services, which Netflix uses to deliver Internet video -- and has a massive global consumer base of 224 million consumers.
Last year, Amazon was reported to be developing a set-top box - which would presumably serve as a delivery mechanism for a linear TV service designed to compete with cable, satellite and telco TV services.
Word that Amazon is seeking TV deals for a virtual pay-TV service comes as Intel announced a deal to sell its own broadband-based television unit to Verizon Communications in a deal worth around $200 million, according to sources. Verizon says the Intel Media acquisition will let it accelerate development of over-the-top services. Sony, meanwhile, said this month it intends to launch a test of an Internet TV service in 2014. Others reported to be interested in the concept include Google and Apple.
If Amazon launched an over-the-top TV services, networks -- especially premium networks like HBO, Showtime, and Starz -- would benefit from an Amazon over-the-top service while traditional cable and satellite operators would risk losing video subs, the Janney analysts said.
Amazon may also use a virtual pay-TV service to rally political support against usage-based billing by broadband providers, which also sell TV service. A federal appeals court ruling striking down the FCC's Net Neutrality rules last week has boosted speculation that Internet service providers will attempt to extract higher fees from companies that consume significant amounts of bandwidth.
For Amazon, a virtual cable TV product "may be needed to protect AWS (Amazon Web Services) from a looming battle over Usage Based Billing (UBB) of Internet data," Wible and Sankar wrote.
2014 Variety Media, LLC, a subsidiary of Penske Business Media; Distributed by Tribune Content Agency, LLC
Amazon Exploring Over-the-Top TV Service
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