Six big questions re: Amazon Prime TV:

1) How many people watch Amazon’s Prime streaming service?
2) What share of total TV time does Amazon Prime account for?
3) How will Amazon price the ad-supported tier?
4) How much ad revenue is Amazon generating?
5) How much ad revenue could Amazon make from each subscriber?
6) How much does Amazon spend on content?

Setting the table: Amazon is bringing ads to their Prime Video streaming service.

Why this matters #1: The largest streaming services now offer ad-supported plans.

Why this matters #2: Amazon already has targeting and measurement. Combining both of these with streaming TV advertising could be a big deal.

What Amazon knows about consumers, according to John Kosner/Ed Desser:
1) Your identity
2) Where you live
3) Products you buy
4) Programming you watch (through Fire TV)
5) Your credit card

Big question #1: How many people watch Amazon’s Prime streaming service?

Amazon Prime Video viewers (YoY growth) according to eMarketer:
1) 2018 – 93M (↑ 15%)
2) 2019 – 107M (↑ 14%)
3) 2020 – 133M (↑ 25%)
4) 2021 – 147M (↑ 10%)
5) 2022 – 153M (↑ 4%)
6) 2023P – 157M (↑ 3%)
7) 2024P – 162M (↑ 3%)
8) 2025P – 166M (↑ 3%)
9) 2026P – 170M (↑ 2%)
10) 2027P – 174M (↑ 2%)

 

Reasons for using Amazon Prime according to Morgan Stanley:
1) Free 2-day shipping – 73%
2) Prime Video – 58%
3) Free same-day shipping – 48%
4) Lower prices – 46%
5) Prime Music – 16%

Big question #2: What share of total TV time does Amazon Prime account for?

Quick answer: Amazon Prime accounts for 3% of total TV time and 9% of streaming TV time.

Big question #3: How will Amazon price the ad-supported tier?

Quick answer: Prime Video will be ad-supported as part of Amazon Prime ($139/year).  If you want an ad-free option, you must pay $3/month.

 

Big question #4: How much ad revenue is Amazon generating?

Amazon advertising revenue (YoY growth):
1) 2017 – $4.7B
2) 2018 – $10.1B (↑ 117%)
3) 2019 – $12.6B (↑ 25%)
4) 2020 – $19.8B (↑ 57%)
5) 2021 – $31.2B (↑ 58%)
6) 2022 – $37.7B (↑ 21%)

 

Big question #5: How much ad revenue could Amazon make from each subscriber?

Quick math on the advertising model for Amazon Prime Video:
1) Ad minutes/hour – 3
2) 30s spots/hour – 6
3) CPM $ – ≈ $30
4) $/spot – $0.03
5) Ad revenue/hour – $0.18

6) ARPU > $3 @ 16.7 hours

Estimated U.S. content spend for Amazon Prime Video (YoY growth) according to Wells Fargo:

1) 2019 – $6B
2) 2020 – $8B (↑ 33%)
3) 2021 – $10B (↑ 25%)
4) 2022P – $13B (↑ 30%)
5) 2023P – $15B (↑ 15%)
6) 2024P – $117B (↑ 13%)
7) 2025P – $19B (↑ 12%)

Streaming services ranked by the total number of movies/TV shows according to Ampere Analysis:

1) Prime Video – 7.4K
2) Netflix – 7.3K
3) Hulu – 6.7K
4) Discovery+ – 6.2K
5) Peacock – 4.9K