You would have to have had your head buried in the sand these past few months not to notice that Amazon has become the “it” company everybody can’t stop talking about. Whether buying Whole Foods, innovating its Echo smart speakers, challenging Blue Apron in meal kits, introducing its own Geek Squad to compete with Best Buy or countless other initiatives, all of a sudden Amazon seems to be omnipresent. And with an estimated 80 million Prime members, Amazon is in fact now literally present in many people’s day-to-day lives.  

Amazon has what it calls “pillars” (Prime, e-commerce, cloud, etc.), and it’s becoming clearer by the quarter that video is fast becoming another one. In video, the company’s efforts are wide-ranging - devices (Fire TV), original content (which is included in Prime and on which it is spending billions), licensed content (also in Prime), live sports (with its NFL Thursday night deal), SVOD distribution (via its Amazon Channels program for 3rd party and original services), digital video premieres (with its Amazon Video Direct program), international (expanding its own SVOD service to 200+ countries) and technology enablement (with AWS and acquisitions like Elemental). In sum, Amazon is already operating in virtually every part of the video value chain.

Despite all of this, I believe that Amazon’s video efforts are still completely under-appreciated. With a number of industry trends coming into view, Amazon’s video momentum could significantly increase and carry it straight into the heart of the pay-TV industry.

On last Friday’s podcast, I highlighted how video is increasingly being used as bait by telcos to add and retain wireless subscribers. AT&T’s Q2 ’17 results, which were heavily influenced by discounting and bundling its DirecTV Now skinny bundle with unlimited wireless plans, is the poster child of this trend. Throw over 60 channels at people for just $10 per month (AT&T’s current bundled deal) and sure enough, lots of people will bite on the offer.

Other wireless carriers are also pursuing similar “video as bait” strategies, and even Comcast is poised to launch its own Instant TV skinny bundle in Q3, leveraging its own experience in the benefits of cross-service bundling, its desire to use Instant TV as a retention solution directed at would-be cord-cutters and the possible recognition that X1 is reaching its saturation point (as Colin suggests).

While these moves may have short-term company-specific benefits, long-term they devalue video and foster the impression that pay-TV service isn’t worth anything close to the $100’ish per month level many people still currently pay. As more existing pay-TV subscribers realize this, assisted by their own shifting consumption to SVOD options, the ground is being softened for Amazon, the king of low prices/margins, to enter the business.

How exactly this will occur is still murky. Amazon could simply pursue an a la carte type model, already exemplified by its Channels program, with one-click subscriptions to over 100+ SVOD services. Many cable networks like HBO, Showtime, Starz, Comedy Central, TMC, AMC (via Shudder), PBS Kids, TLC, Lifetime and others are already no doubt experiencing first-hand Amazon’s promotional power. With more networks looking to emulate the success of CBS’s OTT success with All Access, and under intensifying downward pressure on fees, the opportunity to distribute an OTT service via Channels will be alluring.

Conversely, Amazon may choose to put together its own package (either a skinny bundle, or a more complete traditional one), and perhaps discount either heavily to Prime members exclusively. Implicit in either approach will be a heavy emphasis on VOD rights. While Amazon doesn’t include video ads today, the idea of targeting and even programmatically selling based on a user’s/viewer’s shopping/browsing would be very appealing both to the networks and also to advertisers. If Hulu and CBS All Access for example, can pursue a dual revenue model, why shouldn’t networks working in partnership with Amazon also do so?

Then there are more wild-card types of plays - for instance, Amazon making a move into wireless itself and creating a compelling video-wireless bundle akin to what AT&T is doing. Earlier this month the WSJ reported that Amazon’s Jeff Bezos and Dish’s Charlie Ergen met, to possibly explore some type of wireless deal. Maybe that would include Amazon taking a stake in Dish’s Sling TV service, which could then be leveraged by Amazon into a Prime member-only offer?

The possibilities for Amazon’s entry into pay-TV are endless, and in a sense, this is what Amazon specializes in - creating opportunities for itself. When you consider the trends in pay-TV service being devalued by large operators themselves, with skinny bundle and other promotional offers, Amazon’s ambitions in video (and its predilection toward disrupt existing industries) along with the pieces of the puzzle it already has in place, the rapid changes in viewers’ behavior and connected TV adoption, the circumstances seem ripe for Amazon to make a more serious move into the $100 billion per year pay-TV business.  

While Amazon’s timing and precise strategy are yet to be determined, one thing is for sure: just as supermarket executives are trembling at the prospects of the upheaval Amazon will bring wen its owns Whole Foods, pay-TV executives should also be on high alert to what the company’s entry could mean to them as well. As countless executives now know, it’s never good news Amazon sets its sights on disrupting your industry.