Amazon.com Inc has scrapped plans to launch an online streaming service bundling popular US broadcast and cable networks because it believes it cannot make enough money from such a service, people familiar with the matter told Reuters.
The world’s largest online retailer has also been unable to convince key broadcast and basic cable networks to break with decades-old business models and join it's a la carte Amazon Channels service, the sources said and has backed away from talks with them.
The reversals come a month after the abrupt departure of Roy Price from his job as head of Amazon Studios, the company’s high-profile television production division, following an allegation of sexual harassment, which he has contested.
They show how difficult it is for Amazon to change entrenched habits in the US entertainment business in the same way that it has done in retail, cloud computing and other areas.
Video has become an important tool for Amazon in generating subscriptions for its US $99-a-year Prime membership service. It is on track to spend some $4.5 billion or more on video programming this year, analysts estimate.
On Monday it made waves in the entertainment world with the purchase of global television rights to “The Lord of the Rings,” planning a multi-season series to draw more viewers to Prime.
At the same time, Amazon is looking to offer a wide variety of television channels through Prime. It originally aimed to offer a limited bundle of key broadcast and cable networks for a set fee, similar to offerings from Alphabet Inc’s YouTube and Hulu.
Such an offering, known in the industry as a “skinny bundle,” is a way of capturing younger viewers who are dropping traditional, expensive cable or satellite TV packages in favor of channels watchable on smartphones and tablets.
But in recent weeks, Amazon decided not to move ahead with a service on the grounds that it would yield too low a profit margin and did not necessarily indicate the direction the TV business will eventually go, the sources told Reuters.
Amazon could still decide to change course and introduce a skinny bundle, but the talks are over, the sources said.
Instead, Amazon has decided to focus on building out its Amazon Channels service, where Prime customers can subscribe to HBO, Showtime, Starz and other networks on an a la carte basis, according to the sources.
Those networks have standalone subscription services, but the advantage of Amazon Channels is that it groups together separate subscriptions and makes them available through the Amazon Video app.
