Amazon.com, Inc. (NASDAQ:AMZN) is in the market for content to power its own online pay-TV service, said a report in the Wall Street Journal, shortly after news broke of Verizon Communications Inc.(NYSE:VZ)’s acquisition of Intel Corporation (NASDAQ:INTC)’s OnCue Web TV technology.
Amazon parleying with big media
Amazon.com, Inc. (NASDAQ:AMZN) has been talking with at least three big media content creators for distributing their channels over its online TV service, said the WSJ, quoting sources familiar with the matter.
Amazon’s strategy is to beef up its existing Prime Instant Video service that offers movies and TV shows on demand to its subscribers – only this time the content would be offered live, just like traditional cable and satellite services.
Consumers ready for a change from cable
Unfortunately, cable’s out-dated technology and rising bills have left consumers fed up. Increasingly, customers are looking for fast, quality streaming across multiple devices accompanied by polished, user-friendly user interfaces, of course, all available at competitive prices. Though cable and satellite services have made some changes recently, such as DIRECTV (NASDAQ:DTV) and Comcast Corporation (NASDAQ:CMCSA), which allow viewing on devices outside the home, these still leave a lot to be desired. Verizon, and now Amazon, may therefore be looking to move cable’s cheese.
Big media’s cosy comfort zone
Unfortunately, the large media groups are worried that content distribution agreements with “over-the-top” services may upset their comfortable and lucrative status quo with the cable and satellite distributors. As a result, the new web services are likely offered content at much higher prices and with riders such as a minimum subscriber base, all of which make it very expensive to procure. “For the companies still working on Web TV, it would mean charging less than traditional competitors for a service while paying more than traditional competitors to offer it,” observes Joan E Solsman in this CNET article.
Amazon denies plans for a pay-TV service
Amazon refused initially to comment on the WSJ article but later said, “We continue to build selection for Prime Instant Video and create original shows at Amazon Studios, but we are not planning to license television channels or offer a pay-TV service.”
One way for Amazon would be to use its pay-TV service as an enabling platform to sell its online merchandise. This way it could likely price the TV at cost and earn a return from product sales, said the WSJ, quoting Tony Wible, analyst at Janney Capital Markets.
Intel was this close…
By all accounts, Intel was on the cusp of realizing America’s first full-blown web TV, until a change of management priorities landed its OnCue technology in Verizon’s lap. The company had reportedly made substantial progress in negotiations for content, and at one point had nearly 3,500 employees testing the product at different locations across America.
The hats in the ring
As of current reckoning, Verizon, Amazon, Sony Corporation (ADR) (NYSE:SNE), Google Inc (NASDAQ:GOOG), Comcast and Apple Inc. (NASDAQ:AAPL) are some of the names that could make online pay TV a reality in America.
“Intel’s failure to launch the TV service on its own shouldn’t be viewed as a benchmark for the entire industry. Rather, the company’s progress should be seen as signal for how close the US is to a true Web-based TV service,” says CNET’s Shara Tibken.
Amazon.com, Inc. (NASDAQ:AMZN) has an ace up its sleeve, however. According to the WSJ article, it already has working relationships with TV networks and studios – it spent an estimated $1 billion on content shopping during 2013, as per Cantor Fitzgerald analyst Youssef Squali.
That’s big money, but the stakes in the battle to control America’s living rooms are likely to run far higher.