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.