And now, the main event…

For the many viewers whose favorite shows are scattered across different streamers, or those simply searching feverishly for NCIS, Amazon is often the perfect solution. Prime Video, after all, doesn’t just offer its originals alongside acquired shows and movies. It also serves as a platform for almost every other major streamer: HBO Max, Paramount+, Starz, Apple TV, etcetera—all available through the same app. But in solving one problem for consumers, Amazon has created another for analysts and advertisers: No one really knows who’s watching what. How much of the engagement on Prime Video—which all feeds into Nielsen’s increasingly important monthly Gauge ranking—is actually coming from Amazon content? How much from the add-on services? And does it even matter?

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Netflix and Disney’s streaming services are two of the only major streamers not available through Prime Video Channels, but for those that are, subscriptions purchased through the Channels program accounted for 25 percent of all new signups in the U.S. as of Q1, according to Antenna. For example, the Channels hub has driven about 10 million subscribers in the U.S. alone for Paramount+ as of October, according to estimates from Antenna shared with Puck. Peacock, which just joined Channels in August, has already gained nearly 1 million new subscribers. And around 60 percent of signups (roughly 1.4 million) for Fox One, which launched in August, came through Amazon.

But as Prime Video Channels continues to add partners, executives at other media companies have understandably started to question how much of Amazon’s engagement comes from third parties. It’s not easy to answer. If you watch something on, say, Peacock via Prime Video, Nielsen would credit Amazon for that viewing time—while also crediting Peacock, but only if the show is an original. The Traitors, Peacock’s biggest non-Olympics hit last year, drove more than 3 billion minutes streamed, per Nielsen. Whatever portion of that 3 billion was watched via Prime would be credited to both platforms, according to Nielsen’s methodology.

Amazon’s scale and ambition to unite the world’s streaming services on its platform will only continue to increase its Gauge share. If Amazon effectively becomes the de facto TV app, it can monetize this attention capture with its proprietary ad management system, thereby owning both audience and ad structure. It’s enough to make you wonder if Amazon—not Netflix—actually won the streaming wars.

It’s becoming more difficult for smaller streamers to resist the siren call of Prime Video Channels, as well. Yes, Amazon reportedly takes around 30 percent of all third-party subscription revenue and often a piece of ad inventory. But Amazon handles nitty-gritty distribution, increases discovery potential, and all but eliminates tech costs for companies that don’t want to invest in their own platforms. AMC Networks recently launched All Reality, a $5/month streaming service carrying mostly library content from its We TV cable channel, exclusively through Prime Video Channels for now. How All Reality eventually performs pales in significance to the fact that AMC now treats Prime Video Channels as a new cable system.

Indeed, companies like AMC aren’t going to grow their audiences without the help of a major aggregator like Prime Video. About 70 percent of streaming customers prefer using an aggregator, and households that use them are more likely to subscribe to more services, per Hub Research. Hub also found that aggregation customers use an average of 9.2 TV sources, which includes seven streaming subscriptions, versus a little more than six sources and roughly four paid subscriptions for those that don’t use aggregators.

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It wasn’t always like this. In the early days of the streaming wars, the focus was on owning the customer relationship and spending big on original content to stand out. But previously held beliefs about the business are now about as useful as floppy disks. Revenue is more important than subscriber growth at any cost, and engagement is more important than ghost subscribers who advertisers can’t reach. When HBO Max left Prime Video Channels in 2021, it lost 5 million subscribers, hoping to sign them back up through a more direct channel. But fewer than one in 10 of that cohort returned, according to Antenna, and HBO Max scurried back to Amazon in 2022. As the chart below indicates, Netflix gets all of its subscribers through direct sign-ups. But services like PBS Masterpiece are entirely reliant on Prime Video Channels, reinforcing its dominance through what analyst Ben Thompson has referred to as aggregation theory.

And the more partners join Prime Video, the more valuable Amazon’s commercial business becomes. Amazon currently boasts the most populated advertising tier of any streamer in the U.S., following its launch of an “opt-out” ad-tier plan for its roughly 130 million domestic users. And Amazon reportedly takes a cut of inventory on every add-on channel that has ads. That strategy also helps to put into perspective why Jay Marine, the head of global sports and advertising at Amazon, is spending so much to acquire sports rights, which drive viewers. Between live sports, advertiser-friendly franchise originals, and dozens of add-on channels, Amazon is building a true revenue juggernaut.

Even if Amazon is sometimes missing from the cultural conversation—the streamer was completely absent at this year’s Emmys telecast—it’s winning in other ways. As of July, Amazon originals had filled 14 percent of the spots on Nielsen’s monthly top 10 lists (annualized), up from 5 percent in 2021, according to Entertainment Strategy Guy. Originals like The Summer I Turned Pretty and Reacher are objective hits, with the first collecting nearly 60 million global viewers in its first 70 days. Overall viewership of Thursday Night Football has increased by more than 50 percent since it moved to Prime Video exclusively in 2022, with current viewership sitting around 14.8 million viewers through the first 11 weeks of the season, per Nielsen. And, similar to Netflix, Amazon is beginning to find its footing with creator projects like MrBeast’s Beast Games, which is an undeniable win (even if it didn’t convert all of Donaldson’s 453 million YouTube subscribers). But although Amazon is one of three streaming services that reach more than 60 percent of U.S. connected TV households (along with YouTube and Netflix), it accounts for less than 12 hours of watch time per month, according to Comscore’s “State of Streaming” report. That’s less than Hulu, which reaches about 38 percent of CTV households but nets around 29 hours of watch time per month. And that’s where add-on channels—alongside an array of free ad-supported television channels—may help the most. It doesn’t need to rely on a string of consistent original hits if its partners provide them. Another benefit: While other streaming service teams must use third-party tracking tools and social listening programs to figure out what people are watching elsewhere, Amazon has access to all that data. Programming teams at Amazon can use this to surface shows like, e.g., Paramount+’s Tulsa King directly to Prime Video’s 130 million monthly active users, and encourage them to either sign up for Paramount+ with one easy click, or, if they’re already a subscriber, dig into the show. Prime Video may end up looking like a marketplace with a broadcaster built on top. Amazon Prime chief Mike Hopkins isn’t walking away from original content, but he’s certainly finding less risky ways to invest in the type of content that audiences really want. But why would Amazon C.E.O. Andy Jassy encourage investing in more midlevel movies or TV shows when he can instead rely on partnerships to deliver the programs his audiences want, take up to 30 percent of the subscription revenue, and help sell the ads that appear on those programs by building out a centralized system? Five years ago, when streaming executives wanted to own the relationship with their subscribers, Prime Video’s marketplace pitch wouldn’t have worked. Today, when discovery and engagement are everything, the platform is a less costly way of staying in the race. Those Nielsen Gauge numbers every month might paint a wildly inaccurate picture of which services are offering the content that people want to watch. But for Jassy, it doesn’t matter. Three years ago, when Amazon was still shelling out hundreds of millions on originals like Rings of Power and Wheel of Time, he reportedly told the Prime Video team he wanted a plan for the service to become profitable, quickly. It may be paying off.

Thanks, Julia. I’ll be back tomorrow,

Matt

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