Amazon boss Jeff Bezos is primed and ready for a fresh assault on the streaming-video space.
The e-commerce giant will roll out a new ad-supported streaming offering early next year that will be separate from its $99-a-year Prime membership, which includes a video service, sources said.
The ad-supported option — part of an overhaul of its media offerings — poses a serious challenge to streaming rivals such as Hulu and Netflix, analysts said.
“If they do an ad-supported service, they will decouple it from Prime and that is a Netflix killer,” Wedbush Securities analyst Michael Pachter said. “It won’t be $99 a year.”
Pachter suggested Amazon would undercut Netflix’s current monthly price of $7.99.
“Who wouldn’t switch if you were poor or you’re a cord-cutter?” he added.
Although it will be separate from Prime, the ad-supported service is ultimately a bid by Amazon to lure people to eventually pay up for Prime membership, said one ad source familiar with Amazon’s plans.
“The main point is to bring in more users that you can eventually up-sell to Prime, or to get to a broader audience that doesn’t want to pay for Prime, in order to increase their video share,” the source said.
The Wall Street Journal reported in March that Amazon was weighing such a move, but sources confirmed that it’s a definite go.
Amazon is prepping a new attack at a time when its video service is gaining ground, sources said. Amazon doesn’t disclose the number of Prime members, but RBC Capital analyst Mark Mahaney estimates it has 50 million global customers.
While Prime’s big draw has been two-day shipping, about half of Prime subscribers use the video service that is included with it, or around 25 million, sources said. By comparison, Netflix has 33 million domestic subscribers.
A recent Sandvine study also shows that Amazon is making major strides — but has a long way to go before catching Netflix. Amazon’s broadband traffic on fixed networks grew from 1.61 percent to 2.58 percent, the study showed. One change is that Amazon snagged popular HBO content, including “The Wire,” “True Blood” and “Boardwalk Empire.” Netflix accounts for 32.39 percent of aggregate traffic.
Rumors have been rampant that Amazon plans to let advertisers into its media ecosystem. Amazon has already experimented with ads in some shows, according to tech site Re/code.
For advertisers, the service could be the Holy Grail in terms of targeting. In theory, Amazon could tell if ads viewed online led to purchases on its retail site.
The news that Nielsen will start rating shows on subscription video services starting with Netflix is likely to encourage advertisers who want to make the leap without forcing Amazon to give up its own data.
Amazon will also have leverage over content producers when it comes to the way it chooses to promote shows and movies within its growing ecosystem, a Hollywood source said.
Amazon didn’t return a call seeking comment.