Amazon doesn’t offer a “skinny bundle” of streaming TV channels — but its a la carte Prime Video Channels service is having a huge economic impact on the pay-TV business.

According to new estimates from BMO Capital Markets, Amazon’s Prime Video Channels will pull in $1.7 billion of revenue this year, more than double from last year’s $700 million. That’s poised to grow to $3.6 billion in 2020 worldwide.

Assuming the ecommerce giant shares on average 70% of the subscription fees, Amazon will pay out $1.2 billion in 2018 to Prime Video Channels partners — ballooning to $2.5 billion in 2020, the firm’s analyst predicted.

“We believe [Prime Video Channels] is a material driver of standalone [ subscribers for many entertainment companies,” representing anywhere from 25%-45% of total OTT users depending on the channel, BMO analysts Daniel Salmon and William Lowden wrote in the report.

In the U.S., Amazon’s Prime Video Channels currently provides a selection of 156 channels. Those include CBS All Access, WarnerMedia’s HBO, Cinemax, and Boomerang; Lionsgate’s Starz; PBS Kids and Masterpiece; Viacom’s Noggin and Comedy Central Now; Hallmark Movies Now; Lifetime Movie Club; Tribeca Shortlist; BBC/ITV’s Britbox; CuriosityStream; Cheddar; and AMC Networks’ Urban Movie Channel, Acorn TV, Sundance Now and Shudder. All movies and TV shows included with the subscriptions are available to watch on-demand, and many channels also provide live-streaming feeds.

A huge advantage Amazon offers partners is massive scale: It currently has about 75 million Prime Video worldwide (including about 40 million in the U.S.) and is on pace to top 100 million by 2020, BMO’s analysts estimated. Amazon earlier this year announced that it had surpassed 100 million Prime members globally but hasn’t broken out numbers beyond that.

In addition, Amazon removes friction from the OTT-subscription process, letting customers purchase access to a channel with a few clicks and by integrating the video services into a unified service available across several hundred devices.

But there’s a tradeoff: Amazon takes anywhere from 15%-50% of the channel subscription fees (estimated to be 30% on average), with bigger players like HBO and Showtime gaining more favorable splits. That’s compared with those media companies keeping 100% for subs through their own, direct-to-consumer services. Plus, Prime Video Channels removes media companies’ direct customer relationship (and limits the data they are able to collect), the BMO analysts pointed out.

Still, on a per-subscriber basis, media partners earn more from distributing their OTT services through Prime Video Channels than from deals in which their channels are bundled into traditional pay-TV or “virtual MVPD” internet services, like Sling TV, YouTube TV, DirecTV Now or Hulu With Live TV, according to BMO’s analysis.

Meanwhile, Amazon is continuing to expand access to Prime Video — including with Comcast, the U.S.’s biggest cable operator. This week, Comcast began rolling out Amazon Prime Video to Xfinity X1 subs, which includes access most of the channels they subscribe to through Prime Video Channels (with the exception of HBO/Cinemax and CBS All Access because of the programmers’ contractual restrictions in their deals with Amazon).

Amazon first launched the program in December 2015 as the “Streaming Partners Program” in the U.S. with about 20 partners, and has since expanded and rebranded the service as Prime Video Channels. The company has launched Prime Video Channels in the U.K., Germany, Austria and Japan. The BMO analysts identified France, Spain, Italy, Canada, and India as potential markets where Amazon could roll it out next.

Source: Variety Media