Ampere Analysis said that the launch of Amazon’s US SPP offering – which now contains 46 partner subscription services from the likes of Showtime and Starz – indicates a wider international move is in the offing.
“We believe the recent launch of the Streaming Partner Program in the US suggests Amazon is looking further, eyeing the international pay TV market,” said Ampere.
Partners involved in Amazon’s US programme also include A&E’s History Vault, NBCU’s comedy service Seeso, and niche SVOD plays like CuriosityStream, AcornTV and Shudder. Meanwhile, the retail giant’s Prime Instant Video service is already currently available in the UK and Ireland, Germany and Austria and Japan, as well as domestically in the US.
Separately, Ampere said that Amazon would only need to add between seven and eight million new Amazon Prime customers to justify spending US$1 billion in a year on acquiring video.
Ampere estimates that there are now 60-70 million Prime subscribers worldwide, who are responsible for more than one third of inbound spend on Amazon’s retail business. Due to Prime customers’ increased likelihood to buy products, the research firm predicts that Amazon can “extensively subsidise content acquisition” by up to US$130 per new or retained Prime customer each year.
“Ampere calculates that the incremental income effect of upgrading an existing customer to Prime ranges from US$100-US$130 a year. Adding an entirely new customer to Amazon’s systems could be worth as much as US$160,” said Ampere.
“This means that for every ~US$130 that Amazon spends on content there will be no net negative effect on retail income after sales and fulfilment costs – providing it can either sign up a new Prime customer or retain an existing one.”
Amazon spent roughly US$2 billion on content last year, a figure that would have only required 15 million Prime upgrades or retentions to justify, said Ampere, claiming that “content spend is crucial to driving growth”.
The research estimates that nearly US$12 billion of Amazon’s US$15 billion retail revenue growth last year came from Prime customers, and that as much as 40% of Amazon’s retail growth in 2015 can be attributed to consumers upgrading to Prime and spending more with Amazon than they did previously.
“Simply put, Amazon can justify spending on content that supports adding and retaining Prime subscriptions because these customers spend over twice as much on other items,” said Ampere Analysis director Richard Broughton.
“The significance of the SPP goes far beyond the retail uplift incentives that the core Prime offer drives. At Ampere, we see it as an early à la carte next-generation pay TV offer. New services are being added regularly, and we believe it is only a matter of time before these are bundled into larger and more expensive packages – akin to traditional pay TV tiers.
“While Prime allows Amazon to subsidise content acquisition, the retailer is also slowly building out what could very well be the template for future pay TV services.”