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Cable Technology Feature Article

January 22, 2014

Amazon Exploring Linear TV Service Despite Others' Failure

By Tara Seals, TMCnet Contributor

Amazon is looking to expand its online video efforts beyond the Amazon Prime Instant Video streaming service, and is approaching at least three major content companies about licensing their TV channels to do so, according to sources.

Amazon already offers a wealth of on-demand online video content, library films, current-season television episodes and original content that it has developed itself. But this service would actually mimic that of a traditional, linear-programming-centric cable or satellite subscription, sources told the Wall Street Journal.

Others have gone here before – and failed. Just this week, in fact, Intel (News - Alert) finally gave up the ghost on its OnCue online TV service, which looked to replicate a traditional pay-TV service only with the quirk of providing a la carte channel options, so customers could choose what to pay for. Verizon (News - Alert) agreed to buy Intel’s video assets after the silicon giant failed to make headway in content negotiations to populate the service.

Sony and Google (News - Alert) have both been rumored to pursue similar initiatives—but have continually run into roadblocks in the form of media companies that have no interest in cannibalizing their existing distribution agreements with cable, telco and satellite providers.

This is wrapped up with the question of content acquisition costs—any online subscription price point would need to be much lower than a traditional TV service—but the content costs are unlikely to come down for digital distribution. In fact, it’s likely the opposite, as media companies look to protect their existing TV revenues.

Even for its existing Prime on-demand service, Amazon invested about $1 billion in content in 2013, according to Cantor Fitzgerald. And that is not chump change when it comes to protecting margins.

But Amazon is nonetheless exploring the linear idea, the sources said, and hasn’t settled on an exact business model. Also, as previously reported, it has been, in tandem, developing its own set-top box (STB) that would take on Roku or Apple (News - Alert) TV as a streaming video platform.

As far as an official Amazon statement, “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,” it told the WSJ.

Edited by Blaise McNamee

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