Friday, November 21, 2014

Amazon To Offer Ad Supported Video Streaming Service

Amazon's plan to rule the online universe has taken a fresh turn with plans to expand its video strategy.  Currently offering Amazon Prime, a $99 a year service that includes video streaming, free shipping, and more, its next move is a separate free, ad supported video streaming service to attract a larger audience.  While no specific launch date was announced, the service could appeal to cord cutters among others.  And while some think it could hurt the Netflix subscription model, I actually believe it will only help it.

For Amazon, it offers another way to monetize its exclusive online content, shows like Alpha House and the new kids series, Gortimer Gibbon's Life On Normal Street, as well as acquired programs from HBO including The Sopranos, Deadwood, The Wire, and more.  Adding an ad component will also help track and perhaps even enable its advertising to lead to online purchase behavior (on the Amazon website, of course).  The data of users to the service coupled with their purchase behavior could bring premium ad pricing.  Plus, the appeal of the Amazon free streaming service might eventually upsell them to a Prime customer.

Why shouldn't Netflix be worried?  Viewer consumption of programming is based on appeal and interest.  With its blend of original and acquired TV and movie content, and a relatively inexpensive monthly price, Netflix customers will remain as long as there is always a breadth and depth of content choices.  But Netflix might just consider a free ad supported service to both monetize its video content and drive adoption to upsell to its subscription service, too.  And Netflix, because they are not tied to their own e-commerce model could also offer a click through to other online retailers to purchase after viewing an ad.  Netflix might like a piece of that action, as well.  The only downside for Netflix, that customers drop the paid subscription for the free model, but it might be worth the risk.

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