Amazon is developing free-to-consumer, ad-supported video service, Ad Age reports, citing unnamed ad agency sources.
The e-tail giant is the second largest subscription video on demand service provider in the U.S., second only to Netflix. The company will spend around $5 billion this year on original content to supply both original and acquired content to customers subscribing to its Prime bundle.
One agency executive told Ad Age that Amazon is approaching content creators with a revenue-sharing arrangement that provides a portion of ad sales and data on audience viewing.
"Amazon is taking a smart approach," an agency exec said. "The only way to strike these deals is to provide a revenue share and share data insights.”
An ad-supported programming service would diversify Amazon out of the saturated SVOD market and place it into an emerging area of free-to-consumer platforms—a position currently being staked out by Facebook and its recently launched Watch platform. And, of course, Google has mined the free, ad-supported video market for more than a decade with YouTube.
"Amazon is doubling down on its own media and content, and thinking about how to make that available,” the ad agency exec added. "The way to do that is a freemium model.”
The executive said that Amazon’s model won’t feature a lot of user-generated content.
"Amazon needs broadcast-quality ad inventory if it's going to attract the kind of upfront dollars that flow to television and compete with networks,” the executive said.