Citing its usual assortment of unnamed sources, the New York Post reports that Amazon is on the cusp of launching an advertising-supported over-the-top service.
The new service would exist outside the parameters of Amazon Prime Instant Video, the $99-a-year SVOD service that competes with Netflix and Hulu. It would also be separate from Amazon Instant Video (NASDAQ: AMZN), a transactional component that competes with services such as iTunes and Google Play.
"The main point is to bring in more users that you can eventually up-sell to Prime, or to get to a broader audience that doesn't want to pay for Prime, in order to increase their video share," said an unnamed advertising-industry source purportedly familiar with Amazon's plans to the Post.
An ad-supported VOD service could, of course, pose a competitive threat to pay-TV's own emerging ad-supported VOD business. However, Wedbush Securities analyst Michael Pachter sees the real threat being to Netflix (NASDAQ: NFLX).
"If they do an ad-supported service, they will decouple it from Prime and that is a Netflix killer," he told the Post. "It won't be $99 a year. … Who wouldn't switch if you were poor or you're a cord-cutter?"
RBC Capital analyst Mark Mahaney estimates that about 50 million people worldwide subscribe to Amazon Prime, a service that offers free two-day shipping on select Amazon e-commerce products, in addition to the SVOD feature. About half of Prime users watch the SVOD service, he said.
For more:
- read this New York Post story
- read this Multichannel News story
Related links:
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