Amazon's new streaming video service, Amazon Video Direct, is being widely reported as an effort to compete with YouTube, but it's probably better to think of it as an extension of Jeff Bezos's ongoing war with Netflix.
Netflix, of course, lets you stream unlimited video for a monthly fee. For a long time, Amazon made a streaming video library available to Amazon Prime subscribers — a broader, annual service whose main selling point was free two-day shipping. More recently, though, Amazon has created a video-only tier of Prime membership that competes directly with Netflix. And while Netflix has blazed the trail of creating streaming-native premium content like House of Cards and Unbreakable Kimmy Schmidt, Amazon is in the game, too, with shows like The Man in the High Castle and Transparent.
That's probably the right strategic context in which to understand Video Direct, which does have a YouTube-like element but also does important work to supplement their Prime offerings.
How Amazon Video Direct works
Video Direct is fundamentally a creator-facing platform, a set of infrastructure whereby people who make videos can upload them to Amazon's video service. Having done so, they have four options for how to make the videos available to customers:
- They can be free to anyone and feature ads that will be sold by Amazon in exchange for a 45 percent cut (this is how YouTube works).
- They can be available for digital purchase or rental, in which case Amazon will keep 50 percent of the money.
- They can be made available only to people who pay for a special add-on subscription through the Streaming Partners Program.
- Last but by no means least, they can be made available exclusively to Prime subscribers with creators earning 15 cents per hour streamed.
The first of these options genuinely competes with YouTube, but it's not very compelling. YouTube has an enormous head start, and Amazon isn't trying to compete with it on price.
Options two and three are kind of interesting, but seem like they'd only be applicable to really big media brands.
It's option four that seems potentially disruptive, because it's giving people and organizations the ability to do something they genuinely can't do now — get into the premium video content game. Right now you can earn a living making ad-free television shows, but to do it you need to talk executives at Netflix or HBO or Showtime into paying you. What Amazon is doing is saying anyone who wants to can make a show with an absolute guarantee that if the show proves popular they will get paid.
Kindle Direct Publishing as a precedent
A good hint that the pay-television market is Amazon's real target is offered by the company's Video Direct marketing material, which emphasizes the idea of watching Amazon video on your television or perhaps a tablet rather than watching casually on a web browser.
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As with any new idea, the risk of course is that it will be a giant flop.
Existing premium television shows are created with plenty of upfront investment and marketing hype, and it's not clear that any of that would work on Amazon's pure royalty model.
But the company has likely gained some confidence from the Kindle Direct Publishing Select program, which produces e-books on a fundamentally similar model. KDP Select paid out a total of $14.9 million in March, up from $14 million in February.
And authors are in some ways more wedded to traditional distribution models than are video producers, many of whom have already embraced YouTube in the recent past and may be open to taking their ideas in a direction that isn't ad-supported.
