Amazon could boost the catalog offerings and sports rights bidding leverage for Prime Video through some M&A, specifically CBS, according to MoffettNathanson analyst Michael Nathanson.
In a research note, Nathanson spelled out several ways acquiring a media company could benefit Amazon Prime Video. With its licensing agreement with HBO due to expire by the end of this year, Prime Video will be in need of a back catalog of quality programming and buying a media company with a film and/or television studio could remedy that. Owning a traditional media company could also strengthen Amazon in its pursuit of live sports by allowing the company to simultaneously bid for linear and digital rights, similar to what Fox’s Star was able to do in India for cricket rights.
“Adding all this up, at present, the best fit for Amazon would be CBS, which has a deep content library, excellent original content creation, CBS Sports and two emerging OTT platforms. For now, CBS doesn’t appear to be a seller as its future is tied up in litigation before the Delaware Chancery Court which will start proceedings on October 3. Pending a positive outcome of that decision in favor of CBS, we remain in a holding pattern,” Nathanson wrote.
CBS is currently entangled in a legal battle with its majority owner National Amusements over an attempt to recombine CBS and Viacom.
The impetus for Amazon to act stems from MoffettNathanson’s recent retail sector research suggesting Prime Video usage and awareness is less than stellar.
The firm’s research showed that only two-thirds of Prime members said they use Prime Video, and that 36% of the total population surveyed said they use Prime Video. Those stats are partly due to Prime members being more interested in other aspects of their memberships like free two-day shipping. But the research showed that of the Prime member respondents who don’t use Prime Video, 37% said their content needs are met by Netflix and Hulu and 19% said they are not interested in the content on Amazon. Elsewhere, 22% of respondents said they didn’t know enough about what content is available on Prime Video.
“In summary, Amazon Prime Video appears to be in need of improving both the quality of its content and the quantity of programming. The service also seems to be suffering from low awareness by subscribers about content offerings. At this point, it is best seen as a complementary product to Netflix,” Nathanson wrote.
Amazon has been taking steps to shake things up a bit at its studio. Earlier this year, after former Amazon Studios chief Roy Price was ousted amid sexual harassment allegations, the company brought on NBC Entertainment president Jennifer Salke to lead the division.
Amazon CEO Jeff Bezos’ push for more high-profile series for Prime Video, amid big hits from streaming competitors Hulu and Netflix, has resulted in the company reportedly dropping $1 billion for its upcoming “Lord of the Rings” series.