After Netflix and Disney+, it would be around Amazon to launch a subscription with advertising. An offer which would obviously be less expensive, but which would bring more to the company.
What if the new SVoD formula was more oriented towards advertising? After piracy and the utopia of advertising, the industry had instead turned to paid subscriptions for about ten years. But the trend would go in the opposite direction, with the return of commercial communications. Netflix has launched its Essential subscription with advertising, Disney+ its cheaper subscription (not yet in France): according to the wall street journalit would be Amazon’s turn with Prime Video.
Prime Video: towards a cheaper formula, but with advertisements
The American newspaper writes that Amazon would seek to launch this new offer in order to ” grow its advertising business and generate more revenue from entertainment “, according to people familiar with the matter. Be careful though, the discussions would be in their infancy and would have started several weeks ago. Additionally, deals with Discovery from Warner Bros. or with Paramount Global could also change and get into advertising.
In fact, Prime Video already offers other revenue streams. In France, we know the films and series for rent, or the offers to other content channels. There are also sports broadcasts that include advertising, such as Ligue 1 Uber Eats.
Regarding the way in which advertising could be integrated, nothing would be fixed: “ one option would be to bring more advertising to existing Prime subscribers and give them the option to pay more for an ad-free alternative and other features “, Write the wall street journal. A priori, the cuts should be “ short “. There is nothing to confirm that Amazon would rush into this voice: the company could completely abandon this project, as close sources have mentioned.
Another explanation could push Prime Video to launch advertising to finance its programs. In 2025, the broadcasting rights of the NBA, the American national basketball league, will be renewed. The platform could participate in the call for tenders, the price of which would be gigantic.
Jeff Bezos’ company looking for new revenue
Amazon is reportedly aiming to increase its ad revenue, as it has been doing for some time. THE wall street journal recalls that the firm’s advertising revenue was $9.5 billion in the first quarter of 2023, up 21% compared to 2022. Amazon would also be the third player in terms of Internet advertising revenue in the United States , behind Google and Meta.
The newspaper states that ” advertisers say they are eager to see Amazon offer an advertising component for the Prime Video service. The interest for this industry is that it can thus be linked to high quality content, better than the vertical videos that abound on all social networks or in advertising banners on the Internet.
Amazon seeks to reduce operating costs
Amazon would seek to reduce its costs everywhere within this gigantic company which does a little of everything. Prime Video is now a real money pump: the production costs of original content have soared. In February, Chief Financial Officer Brian Olsavsky said content spending (original productions, sports programming and licensed content) had been around $7 billion in 2022 alone.
By 2021, Amazon had acquired MGM, at $8.45 billion, with a catalog of 4,000 movies and 17,000 TV shows. Also, the series The Lord of the Rings: The Rings of Power cost the platform $250 million in adaptation rights alone and $465 million to produce the first season. Costs that are not at their end: five seasons in total are planned, which would take the total cost to more than a billion dollars. However, until now, nothing forced Prime Video to be profitable: the first factor of subscription to Amazon Prime remains the free and faster delivery of certain products. On the other hand, Amazon is playing long-term with its SVoD service, in order to bring subscribers into its ecosystem.
Andy Jassy, current CEO of Amazon succeeding Jeff Bezos, reportedly said internally ” that he saw the value in entertainment and especially live sports, but he also spent a lot of time reviewing unprofitable divisions of the business “, indicates the wall street journal. More broadly, we are witnessing a kind of crisis within Amazon: in a few months, around 27,000 employees have been laid off, which represents between 7 and 8% of the total payroll. This occurs due to economic uncertainty, but is also part of a cost reduction strategy.
The entire SVoD industry (or almost) changes course: direction advertising
One of the reasons for the success of SVoD platforms was their catalogue: Netflix with its major American series, Disney+ with the Marvel universe and Star Wars, etc. But another reason regularly cited is the lack of advertising. At a time when television channels tend to multiply and lengthen advertising slots, these services allow you not to see your films and series cut intermittently.
But in recent months, the situation seems to have changed. To maximize their profitability, the platforms find themselves forced to convince more potential subscribers, not being able to continually increase their prices. This is why Netflix and Disney+ have in particular turned to offers that include advertising. It seems that a third SVoD giant would like to do the same.
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