Amazon.com, Inc. (NASDAQ:AMZN) has been in the news repeatedly over the past few days because of its video services, including the announcement that it would be adopting “The Lord of the Rings” as a Prime Video series. AMZN stock got a 1.4% nudge on that news.
The latest development is from Reuters, which claims the company was working on an Amazon skinny bundle of cable channels, but it has now dropped the project.
Amazon Skinny Bundle Plans on Hold
Reuters published a report this morning claiming that AMZN has been negotiating with network broadcasters in an attempt to put together an Amazon skinny bundle, but that the company has put those plans on hold.
According to Reuters’ sources, AMZN wanted to add a selection of key TV channels to its Amazon Channels service in an attempt to capture cord-cutters who no longer wish to pay for cable or satellite TV packages. The negotiations reportedly included Amazon trying to avoid the standard practice of including less popular channels with its bundle, and also AMZN pushing for discounts based on subscriber volume.
When those efforts failed, the company apparently put its Amazon skinny bundle plans on the back burner.
Amazon’s Growing Video Ambitions
Amazon has been openly pursuing the video streaming market and the past week has seen a flurry of reports about the scope of its ambitions.
In its Q3 earnings report, AMZN noted that NFL Thursday Night Football on Amazon Prime Video had attracted 7.1 million viewers from 187 different countries in its first four games. It also announced a collection of original series under development — part of the $4.5 billion the company is expected to spend on video programming in 2017 in its effort to take on Netflix, Inc. (NASDAQ:NFLX).
The week kicked off with rumors Amazon was considering a freemium, ad-supported version of its Prime video service (currently part of a $99 yearly Prime membership). The company denied that claim. However, the same day, AMZN was in the headlines again as it announced a deal to bring the popular “The Lord of the Rings” novels to Amazon Prime Video as a multi-season, original series.
The company also offers Amazon Channels, an a la cart service for premium subscription channels like HBO, which customers pay for, but access through Amazon video.
Why the Focus on Video?
Amazon video is far from a driver of revenue or AMZN stock. For a division that does that, look no further than AWS. The company’s cloud business earned income of $1.17 billion on revenue of $4.58 billion.
However, AMZN sees Prime video as a key driver of Prime subscriptions. Prime members pay a $99 annual membership fee, and in addition they spend an average of $1,300 yearly on Amazon — double the amount non-Prime members spend. An Amazon skinny bundle added to its Prime video offerings (even if AMZN charged extra for it) would be yet another way to drive up Prime membership. That would boost Amazon’s retail revenue, a key component that some analysts predict could see AMZN stock push the company to a $1 trillion valuation within the next year.
Outlook for an Amazon Skinny Bundle?
AMZN may have given up on the idea of an Amazon skinny bundle for now, but that doesn’t mean it won’t try again later. After all, Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) managed to pull it off earlier this year with its 40-channel, $35 YouTube TV.
Instead, like Apple, it looks as though Amazon has adopted a wait and see approach. According to Reuters’ sources, Amazon is expecting pay TV subscriptions to decline with time, making networks more motivated. In other words, that Amazon skinny bundle may not arrive this year, but don’t count it out altogether.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.