The new Amazon and HBO deal is a giant victory for Amazon’s digital content strategy. Earlier this month, Amazon launched its entry to conquer television with the Fire TV. Previously, one of the biggest knocks against Fire TV was that it didn’t have HBO Go. Today’s deal speaks volumes to how big Amazon–HBO will be.
Fire TV will have HBO Go embedded by the end of the year — just in time for the holidays — immediately raising the value of Fire TV to consumers in a growing digital market.
The deal also brings older HBO shows exclusively to Amazon Prime, along with older seasons of new shows. Some may argue that without the new shows/episodes, it’s not a “game–changer”. However, since HBO Go will be on Fire TV soon, the point is rather moot. And let’s not forget, HBO has still yet to match the ratings it had for the Sopranos finale seven years ago.
Amazon Prime is pushing hard to stock up on original and exclusive content. It makes sense, as Netflix and Youtube now account for over 50% of internet traffic, and Amazon wants in.
Amazon’s Strategy in the ‘Netflix vs. Cable Providers’ War
Netflix is waiting on the FCC as it publicly battles cable providers over having to pay for the bandwidth its customers use to stream its content. Netflix went so far as to challenge the Comcast–Time Warner Cable merger. Meanwhile, Amazon is cozying up to HBO, one of cable providers’ most valued assets.
Even though they currently pay providers, Netflix’s business model requires this public fight. They have no other revenue streams, and no other way to keep consumer subscription costs competitive.
Amazon can afford to sit out and pay providers, relying on its traditional revenue streams to subsidize any increases. They’ve chosen to let Netflix do the fighting. And why not? A Netflix win over cable providers is also an Amazon win. If Netflix loses, Amazon still wins as Netflix’s streaming costs will ultimately raise Netflix’s rates which are rumored to hike this summer.
The exclusive HBO deal is huge for Amazon’s content and digital strategies. An Amazon Prime victory is a victory for Fire TV, Kindle, their ad network, their commerce, and every other aspect of their business. Every piece of Amazon’s digital strategy compliments and expands the others, but remains strong on its own.