Barry Diller: Pay-TV Program Margins 'Decimated' by Amazon Prime15 Jan, 2015 By: Erik Gruenwedel
With the pending rollout of four new original Prime Instant Video series, and Amazon trumpeting its collaboration with Woody Allen for the Oscar-winning director’s first TV show production, conventional wisdom would suggest the e-commerce behemoth is looking for the same thing multichannel video program distributors are: viewers.
Not so, according to Barry Diller, former head of Paramount Pictures and now chairman of media company InterActiveCorp (IAC), who contends Amazon is merely using streaming video to lure and sustain Prime members more interested in e-commerce.
To Diller, who financially backed recently shuttered Aereo TV, it’s no coincidence Amazon last month disclosed adding 10 million new Prime members during its 20th winter holiday retail period — underscoring the focus more on what consumers bought than watched.
“Amazon is not doing [Prime Instant Video] to benefit advertisers. Essentially, the programing in this case is the advertising,” Diller told CNBC.
In a sense, according to Diller, Prime Instant Video is a Trojan Horse that entices members with all-you-can-stream movies and TV shows, while subtly generating revenue and profit from myriad online purchases by millions of members eyeing free two-day shipping, among other perks.
“If they sign up to Prime, they get a whole slew of things, some of which is fresh new video. That’s a [business] model no one has ever heard of,” Diller said.
For multichannel video program distributors predisposed to generating and selling viewer ratings to advertisers, Amazon Prime is a business model they can’t compete against, according to Diller. Indeed, the executive said the days of MVPDs extracting “pricing power” on advertisers and, to a lesser extent, consumers via ratings are over. And so is their growth.
“You’re not going to get the kind of [retransmission] increases programmers got, and if you’re a cable operator, your margins are being decimated on the programing side,” he said.