Amazon has announced that after 10 years, its Prime Video service was watched by 175 million Prime members in 2020. As total Prime subscriptions passed 200 million, up 50 million in 2020, this looks like an immense success, but unfortunately, Amazon is being a bit disingenuous with its definitions.
There aren’t industry-standard terms in the VoD circuit. The AVoD crowd likes to talk about Monthly Active Users (MAUs), on the basis that this represents their core audience of habitual and return viewers. Pay TV and SVoD prefer to use variations on ‘subscribers,’ but rarely if ever provide indications on these subscribers’ activity levels. With Amazon, we are clearly seeing some shenanigans unfold, in using ‘the past year’ as a yardstick.
The top-five global SVoD players were the subject of a Rethink TV report, just over a year ago. In that previous forecast, we had anticipated Amazon ending 2021 with 188.76 million Prime subscribers globally. In 2022, we expected it to hit 226 million – such was its rate of acquisition. Of course, in 2018, some 90% of these subscribers were in North America, but by 2021, we were expecting Europe to have grown to around 24% of the total, with North America declining to 63%.
So, Amazon has grown its subscriber base faster than we expected. Just on the Prime subscriptions alone, Amazon will be making something like $28.8 billion this year, in our old projections.
In that older model, we estimated that Amazon was achieving something like a 43.1% penetration rate. That is, around 43% of total Prime subscribers could be counted as an active viewer of Prime Video – such that we can fairly compare it with the likes of Netflix and Disney+.
But of course, Amazon isn’t providing that detail. Bezos states that over 175 million subscribers have streamed shows and movies in the past year, and that streaming hours are up more than 70% year-over-year.
Now, 175 million of the reported 200 million total Prime subscribers is a penetration rate of 87.5%. But when you envision the kind of growth that would be expected in that rate, it does not tally with the assertion that total viewing hours could grow 70% in a year.
In order to see that shift, one would expect there to have been some sort of event – the addition of a suite of blockbuster titles that would poach time from rivals, or the introduction of a new strategy that stole eyeballs and minutes. We didn’t see that, in the past year or so, and nor have we seen the collapse of a rival that might let viewers shift their attention more to Prime Video. On the contrary, Disney+ has only ratcheted up the pressure.
Based on this, we are immensely skeptical that 87.5% of Prime subscribers should be likened to a Netflix or Disney+ subscriber. Amazon is almost certainly counting any single view within that year period in the total, in order to make its figures look better on paper. In fairness, the video advertising industry is very well versed in counting fractional views too, but drawing the conclusion that Amazon has reached level-pegging with Netflix and Disney is misguided.
Netflix has nearly 208 million subscribers, although only added 4 million in Q1 2021. We covered the market’s overreaction to that news a couple of weeks ago, while Disney+ will have passed 100 million subscribers by now – reporting 95 million back in February.
Elsewhere, Comcast’s Peacock claims to have hit 42 million accounts, with a third of these being Monthly Active Users (MAUs) – some 13.86 million. HBO Max is claiming 63.9 million global subscribers, although some of those are not on HBO Max yet. ViacomCBS says its combined services have around 30 million subscribers globally, while Discovery has passed 12 million, and Crunchyroll has hit 4 million.
If you follow Amazon’s reasoning, its point of view puts it at 28.61% of total global subscribers – second to Netflix, on 34%, and ahead of Disney+ on 17.2%. However, based on our Rethink TV estimate, Amazon actually has around 15.7%, putting it in third place, behind Disney+ on 20.3%, and Netflix on 40.1%.
Of course, Amazon has spent a considerable amount of money on content, and has recently secured the Thursday Night Football games from the NFL – in a deal worth around $1.32 billion per year. In his final letter, CEO Bezos said that Amazon spent $11 billion on video and music content in 2020, up from $7.8 billion in 2019. Borat Subsequent Moviefilm was a big hit for Amazon, but whether it drew in any new Prime subscribers is unclear.
The biggest draw for a Prime subscription is the free shipping it provides. To this end, the video service is something that is explored after that subscription has been activated – an added extra that helps keep those Prime subscribers sweet.
We still maintain that the number of Prime Video subscribers that exclusively use the video service and do not purchase anything on the Amazon store can be counted in single digit thousands. Prime Video keeps people around, but it alone does not swell the Prime subscriber count.
Of course, that could change. There’s a new CEO in town, now that Bezos is stepping back. AWS’s former head is now leading the entire operation, and Andy Jassy just might try a video pivot. One of the reasons for Bezos taking a back seat is to try and deflect the oncoming wave of regulatory action that will seek to curb Silicon Valley’s reach.
In terms of antitrust moves, breaking Amazon apart into its component pieces is a likely remedy. AWS being shorn off is an obvious move, but it is less clear where you would place Prime Video. It doesn’t really fit in with the retail side of the business, and while it makes more sense inside AWS, this is not exactly an obvious pairing.
The question then becomes whether Prime Video could survive as its own entity, if it were excised from its host. We can see that there’s room for growth among smaller players, in the form of Discovery and Crunchyroll, but the likes of HBO would be chomping at the bit to knock an independent Prime out of the top three globally.