Why Amazon Is Expanding Its Live TV Service To The UK

Recently, Amazon (NASDAQ:AMZN) announced the launch of Amazon Channels in the UK and Germany, allowing its Prime Members to add channel subscriptions for a low monthly subscription fee. These channels will be available individually, eliminating the need for expensive bundles and lengthy contracts. Amazon already has a similar service in the U.S., where the cord-cutting phenomenon continues to pick up pace. As many viewers prefer to choose and pay for the channels they are interested in watching instead of subscribing to expensive Pay-TV bundles, streaming services are gaining popularity. According to eMarketer, Amazon Prime has been seeing the fastest growth among streaming services of late. The roll out of its stand-alone streaming video service, and the success of its Fire device are the key contributors for this growth. Amazon is competing aggressively with Netflix by investing heavily in original content to attract users. By providing a live TV service, Amazon is looking to broaden its subscriber base, especially in the UK.

TV Dominates Video Viewing In the UK

While the cord-cutting trend is not as significant in the UK as in the U.S., 72% of the UK population (above 4 years of age) consumes live TV content. Amazon Prime Video and Netflix form only 5% of the total video consumption. Given this trend, expanding its services to include live TV makes sense as a way to attract users to Amazon’s service. Its on-demand video service is already available free of cost to its Prime members, and with relatively cheap subscription rates, there will likely be solid uptake of its live TV service among existing members.

Creating A Go-To Place For Streaming Video

Netflix is focused on high quality content and is investing heavily in movie rights and original programming, including comedy shows. The company has stated that it will not introduce live sports on its platform and remains focused on on-demand video. On the other hand, social media platforms such as Facebook and Twitter are looking to broadcast live sporting events to attract audiences and create a social experience around sports. Amazon appears to be merging both of these strategies by providing on-demand content such as original shows and movies along with subscriptions for live TV channels (competing with the likes of Sling TV) and broadcasting live sports. This strategy is likely to make Amazon’s service more broad-based, which could attract more customers.

Further, Amazon’s hardware devices such as Echo and Fire can benefit significantly from its expansion in the streaming segment.  In June this year, the company is launching “Echo Show”, a version of its popular home automation device “Echo” with a video screen. This screen can be used to stream content from Amazon and YouTube and make video calls. Reports suggest that Amazon is also in talks with Dish Network to lease its spectrum for wireless services. This partnership would help the company’s streaming service, which can benefit from this uncongested spectrum, leading to a higher quality and speed of broadcast.

We believe that expanding its streaming services into the live TV segment is a smart growth strategy for Amazon. It will allow viewers to choose the content of their choice – live TV, live streaming and on-demand video – under one umbrella, and should help boost Amazon’s subscriber base.

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