It’s no secret on the street that Amazon is in talks with Disney about sweeping up a minority stake in the streaming version of ESPN that Disney is developing.
What isn’t nearly as apparent is what it intends to do with it and how that plays into its larger corporate growth strategy. Consider Amazon’s motivation behind the acquisition of MGM which was a strategic move to expand its content library and compete with other streaming giants like Netflix and Disney+.
Now Amazon is positioning itself to target more studios or networks that have valuable intellectual property, such as Lionsgate, AMC, or ViacomCBS.
Ecommerce On TV Is Amazon’s Core Business
Even if Amazon does keep prime integrated with its core business as part of its customer attraction and retention strategy, what’s to stop it from acquiring other streaming services and cable companies to generate new revenue streams in the space?
It could then also leverage its intellectual property and 30,473 patents to dominate the industry by selling pick axes to the goldminers, as it has done in its $80.1 billion cloud business.
Amazon will continue to build on its partnerships with other streaming services and cable providers to offer bundled packages to its customers.
It is already one of the biggest portals to third-party services like HBO, Showtime, and Starz through its platform from which it captures roughly 15% to 45% of the monthly subscription fee from these services, depending on demand.
But its streaming TV economic engine doesn’t stop there. Amazon also gets a sizeable share of the advertising revenue from some of the ad-supported streaming services that are offered on its Fire TV devices, including Pluto TV, Tubi, and IMDb TV.
Blueprint To Dominate The Next Era Of Innovation
Going forward, it is reasonable to assume that Amazon will expand its revenue share agreements with other third-party streaming services, especially as the market becomes more competitive and fragmented.
Amazon will leverage its lock on 67 million prime video customers, its global distribution network, and data capabilities to attract more streaming partners. Then it will offer them increased exposure, cross-promotion, and analytics exactly as it does with third party sellers on Amazon which generated a mindnumbing $80 billion in 2022.
Tactical moves like Amazon’s partnership with Comcast to sell Comcast’s TV and internet services on Amazon’s website, and to launch Prime Video on Comcast’s Xfinity platform are prime examples of how its executing on its strategy.
Covering All The Bases
Another partnership in a different vertical allows Verizon to use Amazon’s system as an extension of its terrestrial service, while adding cellular solutions to extend Verizon’s 4G/LTE and 5G data networks.
Wireless is especially strategic for Amazon in the streaming TV space to gain access to Verizon Stream TV customers. Although the service doesn’t have much traction at this early stage, eventually it could hit its stride.
Amazon is hedging its bets in case it does. With 143.3 million wireless customers in the US, it would be reckless to ignore the second-largest service provider. Especially when you factor in its fiber-optic broadband and TV services under the Verizon Fios brand.
Amazon and Verizon have also collaborated on projects such as AWS Wavelength, integrating Verizon’s 5G Edge MEC platform with Amazon’s cloud computing service which is on pace to generate $100 billion in 2023.
So it’s not about making Prime Video the top dog in streaming TV. Although it is a growing and profitable business, as a standalone service, Prime Video would only generate about $5 billion.
Its larger ambition is to be the dominant ecommerce platform for streaming TV regardless of which companies provide access to it. Prime Video is a gateway to what could become a trillion dollar industry by 2030.
Expanding Reach To Millions of Cable Subscribers
Amazon also partnered with Comcast to add Prime Video to the online content available through its Xfinity service. This gives Xfinity customers access to Amazon’s original content, movies, shows, documentaries, and programming for kids while expanding Amazon’s distribution to an additional 32 million subscribers.
But it doesn’t stop there. Amazon has distribution deals with other cable providers, such as Cox Communications, Charter Communications which owns Spectrum cable, and Altice USA, which has nearly 5 million residential and business customers across its cable TV, internet, phone, and mobile services.
These powerplays position Amazon to offer Prime Video as an app on set-top boxes, making it easier for customers to switch between cable and streaming content without changing devices or inputs so it could become the default streaming service as streaming and cable converge.
So it should come as no surprise that Amazon acquired the rights to stream popular sports events, such as the NFL Thursday Night Football and the Premier League, to appeal to a wider audience. ESPN is a natural extension of that foundation.
Meanwhile, Amazon is expanding its global reach by launching its video service in more than 200 countries and regions, and offering localized content and subtitles.
ESPN is considering charging between $20 and $35 per month for its direct-to-consumer version of ESPN, a price point that would easily stand among the highest in all of sports streaming, firmly planting Amazon’s flag at the top of the next summit.
When Amazon becomes a minority owner of ESPN, it also gains access to a valuable asset that could boost its own streaming ambitions and challenge the dominance of Netflix and Disney.
The end game is that these titans will be more likely to become future Amazon customers and partners as their bargaining power diminishes.
SWOT Report is now Business Intelligence Weekly. The creator and journalist behind the digital publication, Andrew Ellenberg, is President & Managing Partner of Rise Integrated, an innovative studio that creates, produces, and distributes original multimedia content across digital touchpoints. To submit story ideas or ask about custom multimedia publishing, call 816-506-1257, email [email protected], or read more of his work in Forbes. To learn about his company check out this profile story.