Just the faintest whiff of a story — an unconfirmed report that Amazon is developing a networked digital video recorder that could live-stream video to connected TVs and phones — ricocheted across the internet and sent waves of fear across the embattled giants in the television industry.

Citing an unnamed source, Bloomberg said Amazon’s Lab 126 research and development center is working on the device, code-named “Frank,” that could reside in a customer’s WiFi network, recording live-streamed shows that could be ported to and streamed by over-the-top devices like Amazon’s Fire TV.

Amazon didn’t confirm the story, much less describe any kind of street date or retail price.

But forgive the roving crowd of Wall Street analysts, Silicon Valley investors and old guard media giants if they seem a little irrationally perturbed about a streaming device that doesn’t even exist yet.

While Wall Street and pretty much everyone else remains transfixed by the disruptive power of Netflix, many in the industry recognize that more than any other single corporate entity, Amazon has the potential to genuinely transform the way TV is produced, distributed and consumed.

The online retail giant, which is approaching its own $1 trillion market capitalization (currently at $926.6 billion) is just getting started in the TV business and, more often than not, just a whiff of news that might signal the direction of its next big move is a big story.

A Leader Among Loss Leaders

In recent months, incumbent media and telecom conglomerates have scrambled to create alliances, culminating in The Walt Disney Co.’s $71.3 billion purchase of 21st Century Fox’s studios, cable networks and other assets, with the primary objective of achieving the kind of global scale that can compete with Netflix.

The challenge for traditional media companies, beholden to production budgets, ratings points and advertisers, is to take on a streaming superpower that’s valued differently by Wall Street, and, according to The Economist, will spend between $12 billion and $13 billion on content this year alone.

Netflix, for example, doesn’t measure the success of an original series like Stranger Things based on ratings or advertisers. And the company itself isn’t valued on profits and losses. Indeed, last year Netflix said it posted negative $2 billion in free cash flow, and another $3 billion to $4 billion in 2018.

Wall Street analysts are more concerned with Netflix’s subscriber growth and its increasing global scale. Thus, the performance benchmark is more esoteric — how much, in the grand scheme of Netflix’s business model, will Stranger Things help it improve on a global subscriber base that had reached 131.1 million as of the end of June?

In the current confines of the subscription video-on-demand business, Amazon’s Prime Video is a second banana, catering to a U.S. base of 26 million viewers (compared to 56 million U.S. customers for Netflix), and spending only around $5 billion on content this year.

If Netflix’s benchmarks for success in the global film and TV business appear to be competitively mismatched, Amazon would seem to take this dynamic to an entirely new level.

“Fundamentally, Amazon sees itself as a retailer,” Brett Sappington, senior analyst for Parks Associates, said at a pay TV industry event in May.

Amazon’s $119-a-year Prime service combines free shipping on a mind-numbing array of retail products, free music, photo storage — and access to Prime Video, the world’s second-largest subscription streaming platform, among other perks.

The latter — with about 125 original series — is there merely to augment virtual foot traffic to the sprawling retail business, which drove a profit of more than $2 billion in the second quarter, Amazon’s biggest to date. For a company with $178 billion in revenue last year, it’s a loss leader in many ways.

The key question for all players: Will Amazon expand its video business to drive retail sales? “The scary part for me is, of all the companies out there, I think it would be entirely possible for Amazon to come out and say, ‘Guess what — you don’t have to pay for local broadcast [channels],’ ” Sappington said. “ ‘We’ll cover that for free as part of Prime. And if you want cable bundles on top of that, we’ll sell that through Amazon Channels.’

“You want to talk about shifting the industry? How about be a Prime member and get free pay TV,” he added. “That is scary.” Add on to that a package of games from the National Football League, or the National Basketball Association, which Amazon could easily afford.

Part of that anxiety might rests in the breadth and depth of the video business Amazon is creating. Few companies in the ecosystem, for example, could pull off the massive scale required for networked DVRs.

Indeed, beyond serving a business agenda that is far different than any other company in media and telecom, Amazon’s video acumen is also distinguished by its vertical integration. From Amazon Studios to Prime Video, the SVOD business competing directly with Netflix and Hulu, to Amazon Channels, an a la carte marketplace where customers can subscribe to individual services like HBO Now or CBS All Access, to its Fire TV streaming-device ecosystem, the company seems poised to control all links of the content value chain.

Studio Commits to Bigger Bets

The top of that value chain, the Amazon Studios unit, was roiled last year when studio chief Roy Price stepped down amid sexual harassment allegations, followed out the door by comedy and drama chief Joe Lewis. Former NBCUniversal, Fox and Aaron Spelling Productions executive Jennifer Salke quickly stepped in, and began immediately swinging for the fences with ambitious original series including The Lord of the Rings and Tom Clancy’s Jack Ryan.

The series adaptation of Rings required a $250 million investment for the rights alone, with first-season production and marketing costs reported at $250 million, per Reuters. The division is building on a solid base of wins, with 2016’s Manchester by the Sea, which won two Oscars, and Transparent, which took home a total of 10 Emmy Awards in 2015 and 2016.

Judging by the upcoming debut of The Romanoffs, the latest series from Mad Men creator Matthew Weiner, Amazon is still hot on the trail for awards.

And, like Netflix, Amazon Studios appears to be heading down the path of signing big-name talent, announcing recent first-look deals with Jordan Peele (Get Out) and Amy Sherman-Palladino (creator of the Amazon hit The Marvelous Mrs. Maisel), among other creatives.

Distribution Ramps Up, Too

As Amazon places bigger bets within its production pipeline, it continues to grow and evolve its distribution systems.

To date, the more-established Prime Video, which competes directly with Netflix in subscription streaming and reaches more than 100 millions users globally across more than 200 countries, has commanded most of the attention. But the three-year-old Amazon Channels marketplace is perceived to be the more disruptive threat, at least by pay TV enthusiasts.

As pay TV operators have essentially recreated the traditional bundle in lower margin internet-protocol form with virtual MVPDs, Amazon Channels has innovated a brand new, a la carte method for distributing content.

CBS All Access became the latest subscription streaming service to distribute through Channels, which lets customers choose from a selection of more than 160 on-demand and live-streaming services, paying for them all in one centralized bill, directly to Amazon.

“Amazon has been absolutely amazing in terms of growing our subs,” CBS Corp. chairman and CEO Les Moonves said in revealing to investors a Channels partnership that had already been in the works. “They’ve been at the top of the list and we like what they’re doing.”

Amazon hasn’t released subscriber numbers for Channels. But speaking alongside Sappington at the May industry event, Kathy Payne, head of content acquisition for Amazon Prime Video Channels, said the program is serving “millions” of customers.

“What we have found is that consumers really love the product,” Payne said. “They’re tired of having contracts. They’re tired of having price increases. They’re tired of not feeling in control of what they’re buying and what they’re choosing.

“All of this is really being driven by the millennials, who have grown up in an a la carte world,” she added. “Customers really enjoy the flexibility of coming in and buying only what they want to watch.”

Catching Fire

Indeed, in terms of comparing Amazon’s global video business model, it’s probably as helpful to compare it to Roku, a device company, as it is Netflix.

According to Parks Associates data from late May, 28% of OTT consumers used an Amazon Fire TV streaming device, up from 24% last year and 16% in 2016. Amazon is still a ways behind market leader Roku, which controls 37% of the OTT device and connected TV business, Parks said.

Like Roku, Amazon is carving out deals with smart TV makers to integrate the Fire TV experience natively.

In devices — and in all things — Amazon speaks in tones of global domination, determined to have consumers watch a show it created, streamed by one of its services via a user experience controlled by and billed for by Amazon.

“In the U.S., U.K., Japan and Germany, we are No. 1, by far, in both sales and usage, regardless of what Roku might say,” Marc Whitten, who heads Amazon’s Fire TV business, said at CES in January.

The FCC items proposing defining some linear over-the-top (OTT) video providers as MVPDs and extending online public file obligations to cable, satellite and radio are still in the works and at press time an FCC source said both would probably not get voted on this week.

Both items already have enough votes for approval--the three Democratic commissioners (including the chairman)-- so the Republicans were on a Dec. 10 must-vote deadline for the items, which had been circulated by the chairman for a vote weeks ago.

But the deadline can be extended, and the source said the political file item would likely get an extension until Dec. 17. The commissioners were still working through edits on the MPVD item offered up by the Republicans, which will not likely be released until next week.

The political file item is in  response to a petition filed by campaign finance reform groups seeking that extended online filing.

Currently, only TV stations are required to post their political files online to an FCC database, but the FCC In August asked whether that requirement should be extended, seeking input on a petition to that effect filed by the Campaign Legal Center, Common Cause and the Sunlight Foundation.

The over-the-top  item would define an OTT that delivers a linear stream of programming as an MVPD. That means those OVDs would have access to content through the FCC's program access rules, but also have to negotiate retransmission consent with broadcasters. It would not apply to TV Everywhere, which is in essence an authentication regime for an online mirror of traditional service, in which access rules already appear. But it does ask questions about how it should treat TV Everywhere.

The idea behind the NPRM is to give over-the top providers offering an online service that mimics a linear cable offering the same FCC-enforced access to vertically integrated programming.

An FCC source confirmed the item had been voted by the Dems, with the Republicans still making edits that were being considered by the other offices at press time.

It is possible that the item could be 5-0 if the edits are accepted.

In addition to starting the process of defining OTT's in terms of competition to traditional video, the item responds to a complaint by OTT provider SkyAngel about access to content.

Exactly which OTTs should be defined as MVPDS and what other obligations or rights would apply beyond that access--PEG channels, exclusivity--are all teed up in many questions for the commenters, and ultimately the FCC, to answer.

A source who has seen the item describes it as the beginning of a process of answering some tough questions that will help determine the future of online video.