News

POV: Amazon’s New Ad-Supported Streaming Service

Background:

Amazon is planning to launch an ad-supported free video service for Fire TV users, according to a report from The Information, bolstering its advertising business further.

Details and Implications:

The new Fire TV service dubbed Free Dive isn’t believed to be free a version of Amazon Prime Video, which offers original content, licensed TV shows and movies for a subscription fee in an ad free environment and is Amazon’s rival to Netflix.

Instead, Free Dive appears to be a play to gain some of the advertising dollars that are currently moving into on-demand video services from TV, as well as offering a free to access service to Fire TV users in the hope to convert them into more lucrative Prime customers. Reports suggest that Free Dive will focus on licensing older TV shows initially, a strategy that has proved to be lucrative for other providers as consumers enjoy the nostalgia of their early life in an on demand environment.

The Amazon service will compete with similar offerings such as Roku’s ad-supported service, the Roku Channel, which distributes TV shows and movies with ads for free and is set to reach 59 million people this year. Amazon’s 48 million customers with Fire TV devices will clearly give Free Dive a good base from which to build out the service and tap into those ad dollars.

The launch of Free Dive would further strengthen Amazon’s hand in the entertainment sector. It is also in talks with Sony and Paramount for streaming rights to strengthen its Amazon Prime Video offering and is reportedly planning a new type of digital video recorder for the streaming era, nicknamed ‘Frank’.

Advertising is Amazon’s fastest growing segment, growing 132% year-on-year to $2.2bn in Q2 2018. It is already bringing in extra ad revenue through ad-supported programming on IMDB and increased video advertising on gaming streaming channel Twitch and recently announced a streamlining of its advertising platform, putting Amazon Media Group, Amazon Marketing Services (AMS – a self-serve paid search marketing tool) and Amazon Advertising Platform (AAP – Demand Side Platform/DSP) into one platform, with all products and campaign reporting in one place. It is also increasing advertising during sports broadcasts it has the rights to, including soccer and NFL games.

Summary:

At the time of writing, Amazon is yet to confirm the launch of Free Dive and has not responded to the reports, however It seems an obvious next move in its growing entertainment empire. If Amazon can connect these ad-supported services with its rich pool of customer and sales data, then it potentially has an even more compelling proposition for brands – with a shorter path between advert and sale than TV or even the duopoly of Facebook and Google. If that is the case, then it wouldn’t be a surprise to see ad dollars migrating to Amazon from TV and elsewhere.

Further Reading:

The Information | Business Insider | CNET | Fast Company | The Verge