Amazon Is Building a Video Empire to Crush All Rivals

Amazon is a rather unique public company. Rather than redirect its profits (when there are profits) to shareholders, its founder and president Jeff Bezos famously prefers to re-invest its huge cash inflows into furthering the business and taking bets on the future.

One of Amazon’s biggest bets is video. This year, the company is likely to spend roughly $4.5 billion on content. This is an immense figure. By contrast, HBO, a content company, will spend only $2.5 billion. ABC and NBC are projected to spend $4 billion and $4.3 billion, respectively. Only Netflix aims to outspend Amazon with a 2017 content budget estimated to be in the $6 billion range. Again, Amazon is first and foremost an e-tailer and cloud services provider. Content isn’t its primary focus. And yet, they’re outspending content powerhouses, in some cases by huge margins, simply because they can.

This content bankroll is a strategic weapon that Amazon is wielding to good effect—outbidding Netflix at festivals like Sundance for potential hit films. They recently paid the NFL $50 million to stream 10 Thursday night games—five times the amount Twitter paid for a similar deal last season. Now, Amazon has a toe-hold into live sports, something rivals like Netflix lack.

Beyond the addition of live sports, Amazon’s Prime Video offering is arguably more attractive than a Netflix or HBO because it not only includes an all-you-can-stream set of titles and originals, but also a large catalog of videos to rent or own (to say nothing of all the other benefits that come with Amazon Prime).

Amazon, like Netflix, has also aggressively expanded overseas. Prime Video is now available in 200 countries. Amazon also has made progress on its original content, snagging multiple Golden Globes and an Oscars win for the company’s Studios division. While Amazon’s originals arguably still lack the cultural cachet and binge watchability as an Orange is the New Black or House of Cards, titles like Man in the High Castle are closing the gap.

But perhaps Amazon’s most potent weapon is Channels. In May, the company introduced “Amazon Channels” in the UK and Germany that lets people subscribe to TV channels on an a la carte basis through their Amazon accounts. Some channels in the offering, such as Discovery, have never been available outside of a bundle before. Amazon offers a similar option to U.S. customers, but mostly for cable channels like HBO and Showtime that users can already buy as standalone apps. Amazon has yet to pry away less expensive, network channels in the U.S. as it has done in Europe.

If Amazon can build on the Channels model and add broadcast networks to the mix it will have arguably created the ultimate video empire—one that combines original content, video on demand, a la carte linear TV and live sports. No rival OTT service could match this.

Amazon famously upended the retail business and is a powerhouse in the cloud. It may not over-run the video industry, but its rivals had better be wary.