Inside Amazon’s pitch to programmers for IMDb TV

Amazon’s free, ad-supported streaming video service IMDb TV plans to follow rival services by adding linear channels from TV networks and other media companies to its service by the end of this year. However, publishers are pushing back against Amazon’s deal terms.

Amazon is asking for publishers to give the e-commerce giant full control over ad sales for publishers’ linear channels on IMDb TV, according to multiple industry executives with knowledge of the matter. Instead of allowing TV networks and media companies to sell a portion of their IMDb TV channels’ inventory, Amazon will provide publishers with 55% of the net revenue from the ad inventory that Amazon sells. The revenue-sharing arrangement would prevent publishers from being able to include their IMDb TV inventory in larger packages with advertisers, which publishers believe would limit the size of the profits they could collect from their IMDb TV channels.

An Amazon spokesperson declined to comment. The Wall Street Journal previously reported that Amazon is talking with media companies about creating linear channels for IMDb TV.

While publishers are not wild about Amazon’s terms, they are torn about turning down the company because of the relatively easy money that they believe they would receive from distributing a linear channel on IMDb TV. Last year some publishers expected the revenue from their linear channels on Pluto TV to be in the “mid-six figures,” Digiday previously reported. The fact that Amazon is open to publishers syndicating to IMDb TV the same linear channels that they distribute on other services or through their own connected TV apps, per media execs, means that whatever revenue publishers would receive from Amazon would be effectively free money.

“Amazon’s basically saying, ‘Here’s some money you didn’t have yesterday for basically doing nothing,’” said Alan Wolk, co-founder and lead analyst at consulting firm TVRev.

In addition to receiving this bonus revenue from Amazon, through IMDb TV publishers could reach new audiences that may not have otherwise been exposed to their videos, so their IMDb TV channels would double as supplementary revenue sources and marketing vehicles, he said.

For publishers, 24/7 streaming channels on third-party services provide an opportunity to make new money from old videos. Because publishers are able to repurpose their video libraries — such as the videos they have uploaded to YouTube or Facebook or shows they no longer air on their TV networks — by stitching together these videos into linear streams, publishers generally only need to pay for the technical costs of creating and managing a linear channel distributed on a third-party service like Pluto TV or IMDb TV. Typically publishers hire a tech provider like Xumo, Wurl or Amagi to power their linear channels, and the companies’ costs are reasonable, according to media execs, though the precise amounts could not be learned.

While on paper, publishers would stand to receive 55% of the net revenue from their IMDb TV channels, multiple industry execs asserted that in reality publishers would end up with less than half of the total revenue that their channels generate because of other fees that would need to be resolved before publishers receive their cut.

In addition to the 45% cut of net ad revenue that Amazon would receive, Amazon would receive a 15% cut of channels’ gross ad revenue and would take that cut before calculating the net revenue split, according to two industry execs. Publishers had mixed opinions about Amazon’s cut of channels’ gross revenue. One media exec said that tax “seems crazy,” while another said the fee is not unusual. For comparison, when a publisher relies on Roku to sell 100% of the impressions in the publishers’ Roku app, Roku takes a 15% cut of gross revenue to cover its operational and serving costs and then can take 40% of the remaining net revenue, unless the platform and publisher have agreed for Roku to pay the publisher a fixed CPM for ads sold by Roku, according to a document on Roku’s site for developers.

Amazon is requiring that publishers use an Amazon-approved tech provider, such as Xumo, to power their linear channels, and these tech providers would receive a portion of publishers’ split of the net ad revenue, according to two industry execs. “It starts to sting,” said one media exec.

Amazon’s revenue-sharing model for IMDb TV resembles YouTube’s and Facebook’s revenue-sharing programs for the pre-roll and mid-roll ads that the two platforms sell against publishers’ videos. Those two platforms typically share 55% of the net revenue with publishers and keep the remaining 45% for themselves. However, Amazon’s model contrasts with the model adopted by other so-called FAST services like Pluto TV that allows some publishers to sell their linear channels’ inventory as well as the model that has been established on traditional TV.

Instead of splitting ad revenue with Amazon, publishers would prefer to split their IMDb TV linear channels’ ad inventory with the platform. This would mirror the traditional TV model in which TV networks typically provide pay-TV providers, like Comcast and Dish Network, with 12.5% of networks’ linear and on-demand ad inventory (or two minutes out of the 16 minutes of ads that networks usually run per hour). That model has been adopted by Amazon and Roku for the ad-supported apps on their connected TV platforms, though Amazon and Roku require that publishers provide them with 30% of their CTV apps’ ad impressions. Under this inventory-split model, the respective companies retain 100% of the revenue from the inventory that they sell, and publishers are able to bundle this inventory with their other inventory and generate better profits on the inventory than they would under a rev-share arrangement, according to media execs.

Amazon appears to be looking to control its IMDb TV inventory in an effort to grow its overall video advertising business. Heading into this year, Amazon had taken aim at TV advertisers and had begun to staff up a dedicated video sales team. Then during this year’s upfront cycle, Amazon made IMDb TV a centerpiece of its pitch to advertisers and agencies. However, ad buyers have had questions about the size of the streaming video service’s audience and the performance of its ads. Amazon has told publishers that it expects IMDb TV — which is available as a standalone Fire TV app, within Amazon’s Prime Video service and through IMDb’s own app and site — to be bigger than Roku Channel by the end of this year, but publishers were unsure what metric Amazon was using when making that prediction.

Amazon is also looking to license more exclusive programming for IMDb TV, as the WSJ earlier reported and industry execs contacted by Digiday confirmed. That exclusive programming could help to differentiate IMDb TV from other FAST services and make it more attractive to audiences looking for free shows and movies to watch.

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