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Amazon Challenges Netflix by Taking Video Service Global

BloombergBloomberg 18/11/2016 Lucas Shaw

BC-AMAZON-VIDEO-EXPANDS-1© Lucas Shaw BC-AMAZON-VIDEO-EXPANDS-1 Amazon.com Inc. is preparing to take its video streaming service worldwide in a challenge to Netflix Inc., the world’s largest paid online TV network.

Amazon, which currently offers the service in only a handful of countries, announced the plans Thursday in a blog post about “The Grand Tour,” a lavish new reality show featuring the former stars of BBC’s popular “Top Gear.”

“In December, the show will premiere in 200 countries and territories around the world, exclusively on Amazon,” the company wrote on its website. Chief Executive Officer Jeff Bezos also mentioned the plans on Twitter.

Amazon, the world’s biggest online retailer, has spent billions of dollars licensing programming and producing original shows and movies as part of its Prime service. Customers who pay $99 a year for free shipping and other benefits get access to a library of new and older content at no added cost.

The expansion of the Seattle-based company’s video service is one of the biggest challenges yet to Netflix, which operates in more than 190 countries after completing its international rollout in January. It is available everywhere except Syria, North Korea, China and Crimea, the company said at the time.

Sally Fouts, an Amazon spokeswoman, declined to comment. The Wall Street Journal reported on Amazon’s plans earlier Thursday.

Video Strategy

The online retailer has funded its video service to increase sales of other products such as shoes, laundry detergent and books. People who watch videos on Amazon are likely to stick around and shop for other products as well. 

To offer video service around the world, Amazon has to obtain global rights and satisfy local regulators. The company began seeking worldwide rights to shows this year, a sign of its plans to expand, according to people familiar with the matter who weren’t authorized to speak publicly and asked not to be identified.

It makes sense for Amazon to push its original programming in other markets, but securing the rights to distribute its entire catalog of movies and shows worldwide would be expensive, said Michael Pachter, analyst at Wedbush Securities Inc.

“They’re not paying FX to run ‘Justified’ in Scandinavia or Gabon,” Pachter said. “The stuff they own, sure, why not.”

Streaming video services like YouTube and Netflix are popular in developed countries, especially the West. Foreign markets where fewer people have access to fixed broadband internet pose more of a challenge.

Amazon earlier this year began selling a standalone video service to complement the existing product, which is an add-on to its Prime subscriptions. The video service will be introduced in new countries in time to offer “The Grand Tour.”

--With assistance from Spencer Soper To contact the reporter on this story: Lucas Shaw in Los Angeles at lshaw31@bloomberg.net. To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Rob Golum, Paul Barbagallo

©2016 Bloomberg L.P.

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