Amazon Channels expands to Europe: how to put the customer first

Monday 29 May 2017 | 13:38 CET | Background

Amazon is expanding its service Amazon Channels to the UK, Germany and Austria. Offered as part of Amazon Prime Video, it's expected to help grow Prime subscriptions. To date, Amazon has lacked live TV and sport content. It can step up the competition in the VOD market with the new partners, complemented with its own original content.

A Prime subscription gives customers free delivery of all Amazon products and costs around EUR 70, GBP 80 or USD 100 per year. Amazon has found Prime 'members' spend much more than others on its site. To keep them happy, it's steadily added more services to Prime, such as express and meal deliveries, as well as digital services like photo storage and streaming music and video. These can be expanded with extra paid options, such as one-hour delivery, unlimited music for USD 8 per month and other streaming video services such as Anime Strike and Heera (Bollywood), each for USD 5 per month. Prime Video is also available on a standalone basis, for USD 9 per month. 

Geographic expansion

Amazon started in December 2015 its Streaming Partners Program (SPP). Participants such as Showtime and Starz outsource the infrastructure, CRM and billing to Amazon, so their services are delivered through the Amazon Prime Video app and integrated with other Amazon properties such as IMDB and search. The service has since been renamed Amazon Channels and has now expanded to the UK and Germany/Austria, which are Amazon's other main markets for Prime Video. As the strategy is clearly focused on selling more Prime subscriptions, more countries will likely follow, such as France, Italy and Japan. We estimate that Prime contributes around 5 percent of Amazon's total sales. For comparison, the highly successful Amazon Web Services contributes 10 percent.

Notable in Amazon's strategy is its decision to cooperate with competitors. The same as its partners, as well as others like Netflix, Amazon has started producing its own video content. The same as with its other platforms (e-commerce, cloud services), the company has decided to open its infrastructure to competitors. Amazon is showing like no other company how to put the customer first. Providers such as MGM and Mubi (independent films) are lifting a ride on Amazon's success. While the VoD services are not especially cheap, at around EUR 4-6 per month, customers can cancel on a monthly basis and choose their own a la carte offering.

A distinct offering

Amazon is largely staying away from sports and live TV, which are expensive and difficult to negotiate. Nevertheless the new partnerships make live TV part of its offering, although it's still early days to say whether this can compete with standard pay-TV subscriptions. 

In the US, the new 'skinny bundles' from over-the-top and traditional TV providers are a way to escape the high costs of cable subscriptions. Sling TV (from satellite provider Dish) and DirecTV Now (from AT&T) compete with independent offers from Sony (PS Vue), Hulu (Hulu With Live TV) and Google (YouTube TV). In Europe, new providers such as Magine (Germany) and Molotov (France) have emerged. In the Netherlands, Mobile2Morrow is trying to start a similar offer, but still doesn't have any of the major channels. NLziet, based by the major broadcasters, wants to launch a standalone offer this year, but is taking its time. 

Amazon is avoiding this difficult market by relying on Amazon Channels instead, and the same as Netflix, focusing on production of its own 'originals'. So limited live TV, but an a la carte offer of VoD services. The combination of originals and Amazon Channels makes for a clever and distinct offering in the market. 

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