Available in the US, the service will stream TV shows and full-length movies with ads on Fire TV devices (set-tops, sticks, smart TVs) and the IMDb website, as well as a forthcoming mobile app. Amazon is likely to license the vast majority of content from traditional studios and networks. So far, the site lists about 130 movies and 29 TV shows, from suppliers like CBS, NBCUniversal Television, Sony Pictures Entertainment, Warner Bros. Television, A&E Networks, and Annapurna Pictures.
The industry had been anticipating such an AVOD offering hosted by Amazon subsidiary IMDb. Last August The Information reported that a service called “Free Dive” was in the works, later corroborated by a CNBC report in October that Amazon was approaching media companies for content targeted to IMDb’s platform. The company denied that it had any AVOD plans as recently as its Q3 2018 earnings call.
Amazon is modeling itself after Roku to make money from ads on top of its hardware, across screens big and small. In recent quarters, Roku has generated more “platform” revenue (ad sales) than revenue from player revenue (hardware sales): Roku’s platform revenue jumped 74% year-over-year (YoY) to reach $100.1 million in Q3 2018, versus $73.3 million in player revenue, up just 9% YoY.
Most of Roku’s platform revenues come from targeted ads it sells across publisher channels. But Roku has also capitalized on broadly distributing its own ad-supported channel — Roku Channel, launched last September — which is populated with licensed content. The company delivers the channel both across Roku devices and to anyone who signs up for a free Roku web account, device owner or not. Amazon is looking to emulate Roku in two ways:
- Monetizing the install base via Fire TV. By integrating a free service (Freedive) into its devices, Amazon will continuously monetize its hardware long after the original unit sale. Amazon can rapidly accelerate and scale ad revenue from AVOD, particularly if Amazon continues to gain market share in connected-TV hardware compared with key rivals Roku and Apple. Last week, Amazon Fire TV eclipsed Roku as the biggest streaming media device in US households, with an active user base of 30 million, versus Roku’s 27 million it reported last week at CES. We expect Amazon to ramp up dealmaking with manufacturers to further expand the install base. Amazon could also launch a Freedive app that could be supported on other streaming devices or consoles.
- Tap internet users on desktop and eventually mobile. Like Roku Channel, Freedive is also being distributed to anyone across the web through the IMDb domain. Eventually, Freedive will also tap viewing on mobile devices by launching a designated app for the service. IMDb reached 78.2 million unique visitors across desktop and mobile in the US in November 2018, who averaged 2.9 minutes per visit, per comScore. With Freedive content, IMDb likely expands its identity to become less a utility and more an entertainment destination — converting casual visitors into intentional viewers, driving up time spent, and accelerating ad growth.
As US households hit ceilings on willingness to pay for entertainment — and SVODs proliferate to over 200 different services in the US alone — we expect consumers to revert back to ad-supported video services, per our top five 2019 predictions.
Paradoxically, ad-averse viewers are also becoming more ad-tolerant, and we believe that growing willingness to sit through ads likely depends on user experience. Consumers worldwide are less willing to pay for ad-free video services versus last year: Just 30% would pay for ad-free video, down from 36%, per Accenture.
Source: Business insider