Advanced Television

IHS: Amazon Video Direct lets UGC choose business model

May 12, 2016

Amazon has launched Amazon Video Direct, which allows video content owners to specify a range of different business models to generate revenue from their content.

Content rights are also granted to Amazon on a non-exclusive base, meaning that videos can be used on, or taken from, other video platforms associated with content owners. However, in the case of content owners using multiple platforms in competing territories, Amazon’s agreement states that the company is entitled to the same licence fees and free trial rights as their rivals.

IHS analysis suggests that users of the service can generate revenues using advertising, rental or purchase of their video content, addition to Amazon Prime streaming service, or as an add-on subscription channel in the vein of the Amazon Streaming Partners Program. Content owners can also take a flexible approach, using a combination of the business models available. Advertising and transaction methods give content owners 55 percent of net advertising revenue associated with viewed content and 50 percent of net revenues from transactions.

Inclusion of content within the Amazon Prime subscription service will grant owners a revenue share of the service, which is calculated according to the amount of time users of Amazon Prime have spent viewing the content. This revenue share is currently fixed at $0.15 per hour for content viewed in the US, while all other countries will generate $0.06 in revenue per hour. Total viewing hours of content viewed for remuneration is capped at 500,000 hours. Finally the content owner can choose to create their own subscription add-on channels through the Video Direct service, in which users specify consumer subscription prices for content accessed through a pay wall. Amazon will handle the consumer billing arrangement, and the company will transfer by wire 50 percent of the subscription fees collected on a 90-day basis.

Amazon’s latest innovation in online video distribution not only grants content owners a valuable tool in monetising their content, but also grants content producers new insights into their audience, including reporting what is being watched, how long viewers remain engaged, and how this consumption behavior varies by market and geography. AVD’s analytics platform offers a compelling tool kit that will allow both established and up-and-coming content publishers to test and tailor the content offered in various locales and, over the longer term, maximize usage and revenues.

The flexibility of business models offered allow for a wider range of content creators to be organically aggregated onto the platform. At the user-generated-content end of the scale, advertising-funded distribution ensures that the maximum audience is reached. Meanwhile, as successful independent content creators move into professional production, paid content models will take over, also supporting existing owners of professional video content. These foundational principles are not novel, and underlie similar recent initiatives from Comcast’s Watchable and Verizon’s Go90. However, Amazon is prepared to offer creators a far more varied set of remuneration models in a single platform.

The IHS Connected Devices Intelligence Service estimates that by the end of 2016 Amazon’s Fire TV and Fire TV Stick platforms will reach an installed base of 14.1 million, reaching 30 million by 2020. In the market for exclusivity-backed user-generated content, AVD’s closest US competitors cannot match AVD’s living room scale. Verizon’s Go90 has no living room scale, because the service is accessible only from portable devices. Comcast’s Watchable – available on the X1 platform – has well below 10 million subscribers.

Amazon has a more limited reach than online video giant, YouTube. However, the installed base of Amazon-specific streaming devices will appeal to many content owners looking to make the jump to primary household TV screens where the majority of viewing still takes place and most content revenue is created. In addition, Amazon’s non-exclusivity in aggregating content will also likely result in existing multi-channel networks, and larger user-generated-content library owners, uploading content onto the platform wholesale.

Finally, the addition of add-on channels marks a continuation of Amazon’s existing approach to content aggregation. By placing pricing and subscriber-management responsibilities firmly in the hands of content owners, the platform absolves itself of the heavy task of curating content, ensuring that the most appealing content on the platform will gain prominence. This free-market approach could be a serious threat to Netflix and other competing services, because it enables the discovery of new talent and cult content, which has previously proven so valuable to these kinds of services.

Categories: Articles, Markets, OTT, Research, UGC, VOD