Ajay’s Weekly Thoughts

Amazon is Launching a YouTube Competitor

Amazon is Launching a YouTube Competitor

Ajay Kishore

May 11, 2016

Amazon is Launching a YouTube Competitor

How does this affect where we watch web series?

Amazon is launching a YouTube competitor called Amazon Video Direct (AVD). The name leaves something to be desired but the news is incredibly interesting. It now creates a third major video distribution platform after YouTube and Vimeo. WSJ describes it as:

Amazon account holders can upload original or their own licensed videos to the Video Direct service, the Seattle-based online retailer said. Such users can designate whether their videos are free to everyone, available to rent or own, offered through a subscription channel, or behind Amazon's $99-a-year Prime paywall.

There were probably many who thought that online video was going to continue to consolidate on YouTube. In fact, it's going in the opposite direction: these three video platforms are in addition to the major streaming networks (Netflix, Amazon, Hulu) and the large traditional media companies (NBC, ABC, Viacom, etc). Verizon is clearly trying to create it's own streaming network with G90. Yahoo attempted the same. Who is to say Microsoft won't do something similar? All this expands Stareable's opportunity. Our value proposition is a lot easier to understand when video is scattered across a dozen different video services, each with their own nuances on how best to categorize, navigate and view. Why can't Google do what we are attempting to do? Because Google is never going to tell you that Amazon has a great webseries right now and you should check it out. And vice versa.

The other interesting thing about AVD is that they are incorporating a financial model from the very beginning so creators can monetize their content. Again per the WSJ:

With Video Direct, Amazon says it is targeting creators and storytellers, giving it a cheaper way to stock up on professionally made video other than purchasing licensed content Amazon said it would keep 45% of revenue it takes in from ads appearing during free broadcasts, which matches YouTube's arrangement. It will keep 50% of revenue from channel subscriptions and video purchases or rentals. For ad-free Prime videos, the company will pay content holders 15 cents for each hour of streamed content in the U.S. and six cents overseas.

The vast majority of creators right now are unable to monetize their content with smaller audiences (less than 1M views per episode). This forces them to treat online content as more of a farm league, expecting to eventually repurpose it or their talent for more mainstream television. If they can create revenues from the very beginning, online video will lose its stigma as a second-tier distribution system. To give you a sense of the numbers, for the ad-free model, if you have a show with weekly 20 minute episodes and each episode is viewed by 100k people, you would generate $170,000 every year. All of a sudden, that's a living. And this backdrop will enable even more creators to explore independent online video publishing. Which is, at the end of the day, great for audiences.

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