Amazon’s new ad-based OTT service is simply getting back to the (Amazon) Basics

Way back in 2011, just as Netflix was teething on the fingers of pay-TV operators, Amazon launched its own SVOD service, Prime Instant Video.

It largely was overlooked, already a latecomer behind Netflix and Hulu et al. But, in a column I wrote when I was editor of FierceOnlineVideo, I warned that the nascent service was as much – if not a bigger – threat to the pay-TV industry and Netflix than any of the other services.

Why? Amazon’s e-tail roots.

In its earliest days, Amazon drove video growth by, among other strategies, at times, offering its tablets at or below cost, by gifting Prime subscriptions to students with .edu emails, and by offering choice: a streaming service through its Prime delivery service, or access to its growing transactional video service that allowed users to rent, or buy, video.

More recently, of course, it began adding a host of original content, while still maintaining ties with content producers and offering transactional video as well, becoming one of the largest, if not the largest TVOD service globally.

With the number of streaming households globally now steaming towards 300 million by the end of 2018 (and with Strategy Analytics forecasting 450 million HH by 2022), it’s no surprise that the biggest players in the rapidly maturing OTT industry are looking to create new services to generate additional revenue streams.

While Amazon’s new service will be ad-based – not ad-supported, mind you – the mix of advertising is still, obviously, up in the air. But it’s easy to consider that there will be plenty of Amazon advertising included, making the new service as much a marketing play as a planned revenue enhancement.

Just as it has used content to drive device sales – tablets, TV screens and connected devices – it will use content to drive sales of its Amazon Basic product line as well as the products of its highest value partners.

As to what content makes a “free” service appealing to an audience that is increasingly ad averse? Originals. Or, at least, reruns of older originals. Amazon, like Netflix, is spending big money on originals, to the tune of $4.5 billion in 2018. But the allure of originals – as Netflix knows – is in the new releases, not so much the catalog.

That older original content could easily be served up to drive an ad-based model to new users who haven’t had the “Amazon Prime Video” experience. And, in the process, it sells some product.

Voilá, additional revenue streams… and a potential feeder stream for Amazon’s Prime delivery service, which really is the end game, after all.

Content is the coin of the realm in the OTT business, and making that content pay off at its highest return is crucial to success. But content is expensive and knowing what viewers are watching, how engaged they are, how they interact with the content and what they’ll want to watch next can help maximize that ROI.

Stay tuned.

Jim O’Neill is Editor of Videomind and Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn