Amazon Prime Could Become a Cord-Cutter's Dream

By Markets Fool.com


Source: Amazon.com.

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The largest online retailer might be expanding into the television industry.

Amazon.com is reportedly in talks with networks to bring live content to its streaming service. AMC Networks CEO Josh Sapan mentioned during the company's fourth-quarter earnings call that Amazon has been in talks with networks. ESPN chief John Skipper noted the same.

Last fall, Amazon expanded Prime to include add-on packages for content from Showtime, Starz, Comedy Central, and several other networks. But if ESPN is in talks with Amazon, it's more likely looking into live-streaming its network in some form of skinny bundle. ESPN's Skipper indicated that if ESPN was going to offer an over-the-top streaming service, it would be as part of a bundle of other Disney networks.

A cord-cutter's dream
Amazon already offers Prime members a growing library of on-demand streaming content, including two Golden Globe-winning sitcoms. In December, Amazon added the option to add on other over-the-top services such as those from Showtime and Starz, so that cord-cutters can manage all their subscriptions from one account. Typically, cord cutters use multiple subscriptions to replace their television viewing habits, resulting in multiple bills and multiple headaches.

If Amazon launches a live TV streaming bundle on top of Prime, it would offer almost everything a cord-cutter needs besides Internet service. What's more, requiring a Prime subscription would allow Amazon to undercut or provide more value than similar services such as DISH Network's Sling TV, which delivers about two dozen channels for $20 per month.

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As a disruptor with two established businesses, Amazon doesn't have to make any profit on its streaming service for it to be a success. Whereas DISH is looking to make a profit from selling television service -- whether that's over the top or via satellite -- Amazon is looking to make a profit from retail sales. And signing up more members to Prime is exactly how it's been able to continue growing sales. Adding a low-margin live TV streaming service will probably add even more members to Prime.

Getting in the skinny bundle
On Disney's first-quarter earnings call, management repeatedly noted that the skinny bundle was the cause of ESPN's 7 million-subscriber loss over the past two years. To combat that trend, ESPN is exploring ways to get into the lighter packages. It's notably available in Sling TV.

But Disney and AMC both seem hesitant to break up their own bundles of networks. Disney has the Disney brand networks, ABC brand networks, and ESPN networks among other. Skipper said ESPN won't be a stand-alone product anytime soon. AMC's Sapan said the company's networks are in a "very good position as any evolution occurs" when asked about how skinny bundles might affect the business.

Certainly, Disney and AMC will have to make a few sacrifices to get their most important networks in more skinny bundles. Getting those networks in an Amazon service would provide leverage against the more traditional TV providers to raise prices, or at least get those networks in more skinny bundles.

Although Amazon is still only reportedly in talks with networks, and none have reported actually making deals, Skipper is confident consumers will be able to subscribe to more over-the-top offering this year. "I think other people will enter into some markets with lighter packages in this calendar year," he told the audience at a Re/Code conference in February.

The article Amazon Prime Could Become a Cord-Cutter's Dream originally appeared on Fool.com.

Adam Levy owns shares of Amazon.com. The Motley Fool owns shares of and recommends Amazon.com, AMC Networks, and Walt Disney. 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.