Amazon + Viacom = Fixed Network Data Caps and the End of TV as We Know It

February 9, 2012 - Openet

As an Amazon Prime subscriber, Michael Manzo, CMO of Openet, loves the new licensing agreement Amazon and Viacom have signed. The value is worth it just for the reduced shipping costs, he says. Briefly, Amazon and Viacom have inked a licensing agreement that will make thousands of new titles, including The Hills, Jersey Shore, The Hard Times of RJ Berger, The Real World, Dora the Explorer, SpongeBob SquarePants, Yo Gabba Gabba and Hot in Cleveland available to Prime customers.

In short, Manzo says, “the deal with Viacom makes an already-attractive offer that much more compelling. Netflix, Apple and Hulu have their work cut out for them.” But there will be other consequences besides just stepped up competition (which by the way is also intensifying with Coinstar’s Redbox and Verizon plans introduce a streaming video service). For instance, Manzo says:

Adoption of these services by the mass market is going to place tremendous load on both fixed and mobile broadband networks and the profitability of those services.

“Canadian operators have already adopted data caps on both fixed and mobile networks and the US operators are considering the same. I would expect to see operators moving first to fixed and mobile data caps and ultimately to convergent data caps in the next 18 months.” Services such as Amazon Prime are the primary driver of this, he says.

There will be a likely change to the traditional television and advertising business models.

“Amazon is charging a flat annual rate for content that rivals the monthly fees charged by many television operators. Meanwhile, Apple prices episodes and seasons rather than channels or channel packages. The point is that with the shift to Internet content comes a shift in the manner in which that content is priced and subsidized by advertising.”

Ergo, over the next five years, we’ll see the beginning of the end of traditional service pricing and advertising business models.

“The volume of ads will be reduced, those ads consumers watch will be more relevan—targeted–to the viewer’s profile and preferences. This is nothing short of an overhaul of the television industry.”


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