Amazon Video Streaming Service

Content will be the end deciding factor as to how successful Amazon is with the service.

Amazon continues to blaze new trails and infiltrate industry after industry. Their latest effort is to continue to grow their market share in the video streaming space. They’re planning to release a video streaming service similar to their existing service, Amazon Instant Video, that is free to end users supported by advertisements. This service is slated to be released early next year.

This poses a serious threat to some of the main players in the space such as Netflix and Hulu. As reported in the New York Post, Michael Pachter, a Wedbush Securites Analyst, stated ,  “If they do an ad-supported service, they will decouple it from Prime and that is a Netflix killer.” The key to this service would be gaining subscribers. Amazon’s intentions are to bring in new users through the free service, give them a taste of what is available, and then up sell them on Amazon Prime and Instant Video.

While this news is making headlines, it is not the first time this has been done. In fact, Hulu currently uses the exact same model. Hulu was originally a free service that was ad-supported. They then built upon that by offering Hulu Plus which enabled access on a wide range of devices and full seasons of many different television series. If you access Hulu through the website, however, it still remains a free; but with limited content.

Sony owned “Crackle” is another example of a free ad-supported platform. The service primarily offers access to older movies and television and does not offer a paid version. Additionally, traditional television has followed this same model with antennae versus cable.

The historical key difference between paid for and free services has been the amount and quality of the content available. Crackle does offer quite a bit of content, but only a fraction are quality movies and Television that appeal to a mainstream audience. Hulu does offer a variety of decent content on their free version, but the majority is time-limited with expirations; B-rated movies aside.

One of the challenges will be that available content is determined by the owner of the content. Recently Taylor Swift pulled her music from Spotify, which follows the same ad-supported model in the music space, because she did not want their to be a perception that music should be free. Amazon could run into the same problem and struggle to get mass media corporations on board.

Content will be the end deciding factor as to how successful Amazon is with the service. If they can provide enough valuable content to bring in a large number of subscribers and up sell a percentage of them to Amazon Prime, the initiative will be a success.

What do you think about this announcement? Do you think Amazon will struggle to get mass media companies to buy into it? Let us know your thoughts in the comments below.