[opendtv] Amazon Considers Streaming Media Service - WSJ.com
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- Date: Fri, 28 Mar 2014 07:41:54 -0400
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Amazon Considers Streaming Media Service
Amazon.com Inc. is considering an advertising-supported streaming television
and music-video service, a departure from its strategy of linking video to its
$99-a-year Prime subscription service, according to people close to the company.
The proposed service, as Amazon has outlined it to potential partners, could
launch in the coming months and could feature original and licensed content,
these people said. As part of the service's development, Amazon has held talks
with the creators of "Betas," a series about a Silicon Valley startup that
Amazon co-produced last year, these people said.
Amazon also plans to offer free music videos with advertising to people
visiting its retail website, two of the people said. A search for Bruce
Springsteen CDs, for example, might yield an option to watch the "Born in the
U.S.A." video.
An Amazon spokeswoman said, "We're often experimenting with new things, but we
have no plans to offer a free streaming media service."
Ad-supported video would be part of a broader move by Seattle-based Amazon to
transform itself from a retailer into a force in multimedia. The company
dominates e-commerce, but rivals like Google Inc. GOOG -1.56% 's YouTube and
Netflix Inc. NFLX -2.18% have leapt ahead in streaming music and video. TV
advertising is expected to generate $68.5 billion in the U.S. this year,
estimates industry researcher eMarketer.
Amazon last year invested about $1 billion to acquire content and produce
original programming, according to Cantor Fitzgerald. Such spending, along with
efforts such as expanding grocery delivery, have left Amazon with scant profit
despite rapid revenue gains.
Ad-supported streaming video would give Amazon an opportunity to flex its
advertising muscle. Amazon has been quietly building out a service for placing
ads on its own and other websites. eMarketer estimates the ad-placing unit will
hit nearly $1 billion in sales this year, rivaling AOL Inc. AOL -1.87% and
IAC/InterActiveCorp IACI +0.39% but smaller than Google's or Yahoo Inc.'s YHOO
+0.39% operations.
By comparison, YouTube—which streams a combination of music, television, film
and original content such as home videos—generated about $5.6 billion in
revenue last year through advertising, estimates eMarketer.
Data Amazon collects about viewers' television and music preferences could
allow it to deliver more targeted ads, including for products sold on its
retail website. It could sell Adidas shoes to Run-D.M.C.'s "My Adidas" music
video fans.
It isn't clear how Amazon would deliver the ad-supported content to users,
though it could create a special section on its namesake website, the people
said. These people cautioned Amazon could indefinitely delay the project or
alter it because of financial or other concerns.
While choosing which shows to produce for its Prime video service, Amazon in
February showed free pilots of 10 series on its website and ran ads for
Berkshire Hathaway Inc. BRKB +0.37% 's Geico insurance before some.
Amazon chose "Betas" for a first season on the Prime service but is unlikely to
renew the series for a second season, people familiar with the matter said.
Amazon has discussed producing the show for the ad-supported streaming project,
those people said. The co-creators of "Betas" weren't available to comment.
Video for the Prime service is delivered through specially equipped
televisions, set-top boxes like those made by Roku Inc., PCs, videogame
consoles such as Microsoft Corps Xbox, and Amazon's Kindle Fire tablet.
That is about to change. Amazon on Thursday invited media to an event in New
York next week where it is expected to release a streaming-video device, to
better compete with Roku, Google's Chromecast and Apple Inc.'s Apple TV. That
service will feature apps found on other set-top boxes like Netflix and Hulu,
according to people familiar with the matter.
The proposed ad-supported service and Amazon's streaming device may be an
effort to entice customers to upgrade to Prime, which offers unlimited
streaming video and two-day package delivery service, the people close to the
company said.
Prime subscribers spend twice as much on Amazon.com than do non-Prime
customers, according to some estimates.
Amazon hopes the ad-supported music and video services prompts users to buy
more merchandise from Amazon.com, those people said. The additional data on
viewing preferences also may help it better tailor product recommendations to
its roughly 240 million users.
—Shalini Ramachandran contributed to this article.
Write to Greg Bensinger at greg.bensinger@xxxxxxx
Corrections & Amplifications
This article has been updated to reflect that Amazon has now denied that it is
planning the service as described. Prior to publication, the company did not
respond to requests for comment. The update also clarifies that the article is
based on Amazon's outline of an advertising-supported service in talks with
potential partners.
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