With so many options for on-demand streaming video these days, it would be nice to have one place that aggregates all of them and manages your subscriptions for you, wouldn't it? Amazon.com (NASDAQ:AMZN) seems to agree, and is reportedly working on integrating more on-demand streaming options into Amazon Prime Instant Video.
Bloomberg reports Amazon Prime customers will soon be able to add other online subscriptions to their account like Time Warner's (NYSE:TWX.DL) HBO or Showtime. Amazon will also sell prepackaged bundles that it curates itself. Amazon will handle the billing and customer relationships, effectively turning Prime into a cable-TV provider without the live programming.
The appeal of having all subscriptions handled in one place could help Amazon Prime compete with Netflix (NASDAQ:NFLX) for subscribers.
Improving its video library
The Bloomberg report, citing anonymous people with knowledge of the plans, says Amazon is going to give Prime subscribers access to an a la carte menu of "major, well-known movie and TV channels." There are already several networks that offer a la carte options, including HBO, Showtime, Nickelodeon, and CBS. Many more offer on-demand programming via their TV Everywhere apps. It's unclear whether Amazon would gain special access to the latter category of services, but the ability to aggregate TV Everywhere apps into one user interface would be a welcome feature.
By including more optional add-on services, Amazon would be setting itself up to compete with the more established content library of Netflix. While Amazon has certainly improved its content library over the past couple of years with the addition of high-caliber original series like Transparent and The Man In the High Castle and older episodes of HBO series, Netflix is still a clear leader in streaming video libraries.
Getting paid to add more content
But Amazon also has the potential to make additional revenue from such an agreement. In exchange for handling billing and customer relationships, Amazon would receive a share of the revenue from each subscription. This is similar to how pay-TV operators receive a share of revenue from selling HBO subscriptions.
In fact, selling access to HBO would be relatively easy for Amazon since it already has a funnel of viewers watching old HBO series on Prime Instant Video. Considering Prime subscribers already have access to part of HBO's back catalog, however, they may want a discount from the typical $15 per month fee for HBO Now. But Amazon could afford to take such a discount out of its share of the the revenue split if it means signing up more people to Prime.
Finding new reasons to sign up for Prime
Indeed, the entire Instant Video segment of a Prime subscription appears aimed at simply getting more people to sign up for the service, which initially started as a 2-day shipping program. It's been well-publicized that Prime subscribers spend significantly more on Amazon than non-subscribers, and the free shipping makes them especially loyal to Amazon when it comes to online shopping.
Consumer Intelligence Research Partners (CIRP) estimates that the 44 million Prime subscribers in the U.S. spend about $1,200 per year compared to $700 per year for non-subscribers. That's why Amazon can afford to offer Prime's perks for such a low price. If Amazon extends those low prices to streaming video on demand services, it could find a whole slew of new Prime subscribers.
Adam Levy owns shares of Amazon.com. The Motley Fool owns shares of and recommends Amazon.com and Netflix. The Motley Fool recommends Time Warner. 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.