Amazon (NASDAQ:AMZN) started out by disrupting the market for books, then it took on retail, and now it appears the company may have its sites set on taking down big cable.
The online retailer has already been part of the solution for the the growing cord cutter movement with its Prime Instant Video service, but it may be taking things a step farther. Amazon is considering creating a live-television streaming service to enhance its existing video offering, according to Bloomberg. Discussions are still in the very early stages, but the retail giant is talking with CBS and Comcast (which owns NBC and various cable properties) about being part of the service, the business news site reported.
If the company succeeded in making the deals needed to launch a cable alternative, it would be instantly attractive to the company's Prime customers -- especially those using Amazon's Fire TV streaming boxes. A live-TV offering from the company could be the final push for millions of people considering leaving traditional pay television behind.
Why is this a big deal?
Products like Amazon Prime Instant Video and rival streaming services give consumers looking to leave cable access to a large array of hit shows, originals, and movies. What those users don't have access to is live programming. That means that while they have no shortage of entertainment options, they miss out on the news, sports, and watercooler shows as they happen.
There are currently two main options for cord cutters looking for access to live television:
- HDTV antenna: This free option (after you buy the antenna, which can be done for under $50) gives you access to what used to be called over-the-air broadcast channels. In many markets, that means all the major networks plus local channels. In a broad sense, you'll get more channels if you live in a more urban area, but it can vary. To see what you might receive, use this tool.
- DISH Network's Sling TV: This product offers consumers around 20 cable channels for $20 a month. The package includes ESPN and TBS, meaning users get access to a lot of live sports. Sling TV does not offer any of the traditional broadcast networks, but it's an excellent group of cable channels, and the company offers a number of $5 add-on packages with expanded sports, movie, and other offerings.
Sony also has a streaming pay television service, but it's only available in limited markets, and it's priced more like traditional cable than a cord-cutting option. If Amazon enters this space, it has the potential to be a major player with instant credibility. It also has a marketing advantage over DISH given its huge number of registered users.
Will this happen?
Just because this makes sense for the online retailer does not mean it's going to happen.
"Those I have spoken with haven't disclosed how far along Amazon is with regards to a live OTT service," Frost & Sullivan analyst Dan Rayburn wrote on his StreamingMediaBlog. "It's possible Amazon is simply looking at the economics of the business, which would involve them talking with content owners about costs."
The biggest challenge for Amazon is making deals with the content owners. That's a major hurdle, because those companies don't want to offer discounts over what they charge traditional pay TV providers. And, of course, in some cases, the content owners are also cable providers themselves, making this a very tricky negotiation.
Amazon should do this
If Amazon can make the deals it needs to launch a Sling-like service with a mix of cable and broadcast networks, it should do so. Because the company has such a large user base and its own set-top box, it would likely be able to build a large base of users quickly.
This is not an easy project for Amazon to pull off, because the companies it's negotiating with know the online retailer has deep pockets. They also know this type of product could undermine their existing big cable partners.
Ultimately, however -- while it may not be soon -- the days of the traditional bloated cable bundle appear to be coming to an end. If Amazon can make this service happen, it will accelerate the timetable, but it's only hastening the inevitable.
Daniel Kline has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.