One of the largest companies in the world is planning on making a flagship service free for consumers.
Amazon is developing a free, ad-supported complement to its Prime video streaming service, according to reports from AdAge. The massive e-commerce company is in discussion with TV networks, movie studios and other outlets about creating or providing programming for the free service.
The current Prime service is $99 a year and delivers free shipping of Amazon products, but also comes with access to the company’s video streaming network. Prime video has released some critically acclaimed shows over the past few years, including Transparent and The Man in the High Castle. Amazon is expected to spend upwards of $5 billion on content this year. The company relocated their studios to LA and struck deals with leaders in the field like Robert Kirkman and Seth Rogen.
Amazon also revealed today that they have acquired the rights to the Lord of the Rings franchise for between $200 and $250 million. The plan is make a fantasy TV series, and if it is anyhting like HBO’s mega-popular Game of Thrones, it will set Amazon back over $100 million a season.
The decision to shift to an ad-supported model could be a boon for potential advertisers as they see cord cutters quickly drift away from the typical commercial model in place with regular TV right now. If consumers buy into a streaming service with ads, businesses may be able to leverage streaming services in an entirely new way.
Video platforms have become a war zone for major companies to grasp footholds in, with Twitter, Facebook and Apple all recently entering the video production game as they see companies like Netflix grow exponentially.
Amazon may even share audience information and ad revenue, linking payments for content to the number of hours people watch it, sources told AdAge.
“Amazon is talking about giving content creators their own channels, and sharing ad revenue in exchange for a set number of hours of content each week,” those sources said.
That model could drive popular creators from platforms like YouTube or Facebook to Amazon in order to gain a real share of profitability.
Other kinds fo content on the new ad-supported service will dwell largely on the back catalogs of TV shows and movies. This includes children’s programming, lifestyle, travel, cooking and anything else that works for an e-commerce platform.
If there’s any indication as to how Amazon has done when it disrupts other types of markets, the company’s entrance into ad-supported video streaming will mean a serious competitor to free platforms like YouTube as well as subscription-based models like Netflix.