Competition in the free, ad-supported streaming segment just got a little tougher for players like Roku (NASDAQ:ROKU) and Hulu. IMDb (Internet Movie Database), the popular movie information website owned by Amazon.com (NASDAQ:AMZN) announced the launch of its streaming video channel, IMDb Freedive. The service will initially be available in the U.S. and can be accessed on the IMDb website via laptop or personal computer, as well as on all Amazon Fire TV devices.
In a prepared statement, the company said it was expanding its video offering beyond the short-form original series, trailers, and celebrity interviews that currently populate the site. IMDb Freedive will offer popular, full-length movies and hit TV shows, for free, without a subscription.
Let’s dig a little deeper into the announcement and explore why Amazon is making this move.
Streaming beyond Prime
The new streaming channel will feature hit TV shows including Fringe, Heroes, The Bachelor, and Without a Trace as well as Hollywood movies like Awakenings, Foxcatcher, Memento, Monster, Run Lola Run, The Illusionist, The Last Samurai, True Romance, and more. The platform will also help customers dive deeper into the programs using X-Ray, a feature that connects viewers with information about the cast, crew, trivia, and soundtracks, and driven by IMDb’s database.
This move expands Amazon’s streaming reach beyond its well-established Prime Video service, which is available a la carte for a monthly fee or included at no additional cost to those who are already subscribers of Amazon Prime. It’s worth noting that Prime Video is commercial free.
The next logical step
This move highlights Amazon’s growing focus on its advertising business, which is expected to top $10 billion for 2018. Year-over-year growth in the segment has soared, with triple-digit increases in each of the past three quarters. It’s easy to see why this would be an area of immense interest to Amazon. The digital advertising space is growing quickly and was expected to reach $250 billion last year, though final figures have yet to be calculated.
A move into digital television advertising will expand Amazon’s addressable market beyond its e-commerce website into an area that has been seeing accelerating growth. You need only look to Roku and Hulu to see why this would be a good fit, and the next logical step in Amazon’s advertising aspirations.
Roku recently released preliminary results from its just completed holiday quarter. Its active accounts grew to an estimated 27 million, up 40% compared to the prior-year quarter, and the sixth successive quarter of year-over-year growth of 40% or more. Streaming hours also climbed, accelerating to 7.3 billion hours for the quarter, an increase of 68% year over year. While Roku hasn’t released its full results, both metrics point to its increasing ability to boost ad sales, which have been soaring. A look at the third quarter results shows that platform revenue, which consists largely of advertising, grew 74% year over year, cresting $100 million for the first time.
Hulu doesn’t provide a full financial release, as the company is a joint venture between Disney (NYSE:DIS), Comcast (NASDAQ:CMCSA), Twenty-First Century Fox (NASDAQ:FOX) (NASDAQ:FOXA), and AT&T (NYSE:T). In a year-end press release, however, it provided select financial metrics that pointed to accelerating growth. The service increased its subscribers by 8 million last year, up 48% compared to 2017, growing its total customer base to 25 million. This helped propel impressive revenue growth, with ad sales topping $1.5 billion, a new record for Hulu.
Two birds with one stone
Launching a free, ad-supported video streaming channel pushes Amazon deeper into two areas where it has proven success: streaming video and advertising.
This platform will give the company additional opportunities to cross promote its online sales and its growing stable of electronic devices, and it will help build out Amazon’s advertising operations. It also gives Amazon properties in both the subscription and ad-supported segments of streaming video, which are rapidly displacing linear television.
Well played, Amazon. Well played.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Danny Vena owns shares of Amazon, Roku, Inc, and Walt Disney and has the following options: long January 2019 $85 calls on Walt Disney. The Motley Fool owns shares of and recommends Amazon and Walt Disney. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.