Whether you hate Game of Thrones, love Mad Men, get irritated by Suits or were annoyed when Arrested Development was cancelled, don’t you sometimes wish that you could be given the chance to decide which TV shows actually get made?
Well, now you can. Not satisfied with being the world’s largest Internet retailer, Amazon has now made a move into broadcasting by creating 14 of its own pilot TV shows and posting them online for users to watch for free and give feedback as to which they like the best.
The Amazon Studios production company will then decide which projects to make into full TV series to be shown on Prime Instant Video, Amazon’s subscription-based online video service. Amazon is following Netflix’s example (with its self-produced, acclaimed drama series House of Cards) to create and deliver TV shows or movies over the Internet, instead of using the traditional channels of cable and satellite services.
But what are the reasons behind the strategy?
Like the cable companies that mainly sell video content produced by others, Amazon has built itself on selling other people’s goods – from books to clothes to electronic devices. But Netflix and Amazon claim that their new Netflix and Amazon Prime models will satisfy a market demand that they feel isn’t being met by the traditional providers i.e. that people want to: 1) pay much less; 2) only pay for what they watch; and 3) not have to deal with excess advertising.
So the next logical step was for them to begin to create their own content, which would theoretically be more profitable than distributing someone else’s. But these “Internet-channel” aggregators aren’t the first to do this: When content aggregators (at the cable channel level) like HBO started to produce their own shows, people were initially pretty skeptical about it. You just have to look at the huge success of shows like True Blood, Sex and the City and The Sopranos to realize how smart a move this actually was. No wonder that Showtime, USA Networks and TNT, etc. have all done the same, encouraged by the thought that the more original content that is created, the stronger the brand becomes, which helps to capture a greater market share, and with higher margins.
Netflix had done a great job building an OTT service that aggregates movie studios, broadcast studios, and even some of the original content cable studios like USA Networks. Now Netflix is following the cable channel providers like HBO and USA Networks by building their own unique content to differentiate their brand and increase their demand in the market. According to a report by Dailytech's Tiffany Keiser, it’s working: Netflix is attributing the 2 million new customers for its U.S. streaming service in Q1 to the success of House of Cards. And now, Amazon Prime is following suit.
But while Amazon and Netflix are only now trying to expand their role in the market, some major broadband, cable and satellite service providers have already been breaking free from their traditional (pipeline) roles for years. Remember the Emmy award-winning show, Damages? That’s an example of original content that was resurrected from FX and then produced and delivered by DirecTV, which also owns channels of exclusive content like the Audience Network (opens in new tab). Comcast owns many regional sports channels as well as NBCUniversal, and the Rogers Media brands include Sportsnet One, Omni and The Shopping Channel.
And should Netflix and Amazon continue to be successful along this path, I wouldn’t be surprised if mobile service providers start trying to figure out how they too can dip their toes into the “own-content” waters.
But while more choice is good news for us, the consumers, what are the implications for the PayTV market as a whole?
I think the traditional model of paying a studio to produce different “channels” of content and making the consumer pay for all of those channels (even if you only like, and want, one of them) will eventually fall by the wayside. We will end up with a true market-driven approach to content that is decided according to the success of each series or movie.
And while many people think that this will stop innovative content from being funded, I disagree. I think (like the Amazon initiative), that the projects that will get funded will only be the ones most likely to appeal to the audiences and make money – this will cut down many channels of unwanted content, while adding hundreds of channels of new and exciting content that can generate revenue and market share.
A year ago, the idea that Netflix or Amazon might win big at the Golden Globes or the Emmys for a best original drama would have been surprising to say the least. But now I wonder who the nominees will be in another year’s time.
Ken Roulier is the chief technology officer for broadband, cable & satellite for Amdocs
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