Digiday+ Member Article

Not all distribution relationships are created equal, and there’s more to Amazon — and other OTT channel resellers plans for growth than meets the eye.

The key hits:

  • Amazon Prime Video Channels is estimated to make $2.6 billion in 2019.
  • As a growing revenue stream for Amazon itself, Amazon wants to keep more of the money by hiking up its percentage take to as much as 50 percent.
  • Some partners such as CBS and Showtime have negotiated deals where they get paid a fixed fee per subscriber. (Netflix has a similar arrangement with T-Mobile, which gives Netflix away for free to some wireless customers.)
  • Amazon is pressuring companies that are on a fixed-dollar relationship to move to a percentage-based model.
  • The fixed-dollar relationship can help both parties: media companies get paid a guaranteed fee per subscriber and distributors can set whatever retail price they want in an effort to drive people to bigger, more lucrative businesses.
  • But not every company is Netflix. And Amazon is pressuring those with fixed-fee deals to accept the (increasingly restrictive) percentage-based agreements.
  • With more competition coming from Apple, Roku, Hulu and others, some argue that this could help create friendlier deal terms with distributors. But even Apple is considering a 50 percent cut of subscriptions for its news subscription service.

As we’ve reported extensively,¬†Amazon Prime Video Channels program has become crucial in driving the adoption of subscription streaming video channels from TV networks and digital publishers. A research report from BMO Capital Markets in December estimated that Prime Video Channels will drive $2.6 billion in sales in 2019 and roughly $3.6 billion next year. Based on an estimated average where Amazon only takes 30 percent of subscription revenues generated by the program, Amazon will pay out $1.8 billion to its OTT channels partners this year.

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