SAE Institute – Glasgow
“Apple and Amazon: What can iTunes teach Amazon Video Direct about ensuring a quality brand image?”
25 November 2016
I hereby declare that this my own work and does not use any materials other than the cited sources and tools. All explanations that I copied directly or in essence are marked as such. This work has not been previously submitted.
Amazon Video Direct enables film makers to upload content for distribution on Amazon Video. Amazon have invested a significant amount in acquiring and producing content for their video on demand service, and the decision to open the doors to amateur film makers can be seen as a risk to the quality of their established brand image, and incongruent in terms of their current rivalry with video on demand competitors Netflix. The purpose of this essay is to examine what, if any, lessons Amazon can learn from Apples iTunes with regard to allowing content providers to upload content, while maintaining a high-end brand image.
I will provide background on the history of Amazon Video Direct and iTunes to give context, and examine the Amazons current position in the market place. I will look at both iTunes and Amazon Video Directs models for uploading content, and the quality of this content. Finally I will conclude whether Amazon Video Direct is a potential risk to the Amazon brand, and what lessons, if any, Amazon can learn from Apple regarding brand management.
Amazon and Amazon Video Direct
Founded in 1994, Amazon is the worlds largest online retailer. Selling everything from books to homewares to high end electronics, the diversity within the Amazon Marketplace is astounding (Blake and Berger, 2013). In 2015 Amazon had total worldwide net sales of $107 billion (Revenues & Profits, 2016) with US annual e-commerce sales of $79,268 and a US market e-commerce share of 74.1% (WWD, 2016).
Described as “quirky, brilliant and demanding” (Brandt, 2011, p. 167), Amazon Founder and CEO Jeff Bezos is undoubtably an exceptional leader. Reportedly worth $67 billion, the Seattle born self-made man views failure and invention as inseparable twins (Forbes.com, 2016). He can also be “ruthlessly competitive with rivals” (Stone, 2013, p. 8).
In 2006 Amazon responded to the consumer cultural shift from hardcopy DVD products to electronic downloads by launching their video on demand service, Amazon Video. Amazon Video was originally launched as part of the Amazon Prime package, a premier service for Amazon customers, who pay a yearly subscription for faster shipment of goods and other benefits. However, in April 2015 Amazon, in a direct challenge to video streaming rivals Netflix, made Amazon Video available on a monthly subscription, independent of the yearly prime package, and undercutting their rivals most expensive package by $3 per month (Forbes.com, 2016). While Netflix remain the video streaming service of choice globally, with the video on demand service boasting 33.15% of all downstream traffic during peak evening viewing hours, Amazon Video comes in a respectable third-place, behind YouTube, with 4.26% (GeekWire, 2016).
Interestingly, although Netflix may have more download power than Amazon Video, Netflix use Amazon computers to distribute their content. Netflix do not have the technological infrastructure to independently support the scale of their operation and rent computer space from their competitor to do business (Brandt, 2011, p. 177).
There are many similarities between Amazon Video and Netflix; Both are video on demand online service providers; both offer their products for a monthly subscription; both acquire content for distribution and produce their own high-end content. Indeed, Amazon is believed to have spent over $3 billion on content for their music and video platforms in 2015, and this figure is expected to grow by $1 billion annually (Business Insider, 2016). Amazon Original Shows, available on Amazon Video include Bosch (renewed for a third season) and The Man in the High Castle (renewed for a second season) (Amazon, 2016).
Amazon Studios have a novel approach to producing some of its content. In addition to the regular commissioning route, twice a year, a round of pilot episodes are made available to Amazon Video subscribers. Subscribers are asked to vote on which pilots are to be commissioned for a full series. Of the original 2013 batch, all but one of these ‘pilot pickups’ were renewed for a second season, demonstrating the value of this innovative approach to content creation (Signature Reads, 2016). A thorough examination of this method of selecting and developing content is outside of the scope of this paper. What this demonstrates, however, is that Amazon Video place a high value their customer feedback and the quality of their content highly.
While there are pros and cons to both services, and their business models differ, that Amazon Video and Netflix should be direct competitors is obvious (the Guardian, 2016). Given this approach it is reasonable to assume that a less likely battle for Amazon to pick would be one with YouTube. This is why many people by were surprised by Amazons April 2016 decision to launch Amazon Video Direct (AVD), touted by many as Amazon’s possible “YouTube Killer” (International Business Times UK, 2016).
AVD allows film makers to post content online, and monetise this content by distribution in one of four ways:
- The video can be free to anyone and feature ads that will be sold by Amazon in exchange for a 45 percent cut.
- The video can be available for digital purchase or rental, in which case Amazon will keep 50 percent of the money.
- The video can be made available only to people who pay for a special add-on subscription through the Streaming Partners Program (a Prime add on subscription programme, available for an extra fee).
- The video can be made available exclusively to Prime subscribers with creators earning 15 cents per hour streamed.
While the fanfare associated with the launch of AVD suggested this move was to compete directly with YouTube, this seems a strange decision and out of step with Bezos ongoing commercial war with Netflix. While option one looks like a YouTube model, option four potentially opens the door for creative individuals and groups to provide quality content and monetise that content outside of a the conventional studio system (Vox, 2016). Innovators potentially have a direct way in that could benefit both Amazon and artist.
In addition to the above payment method is the AVD monthly $1 million Stars Programme. In this, a share of $1 million is divided amongst the top 100 AVD titles for the corresponding month.
In theory AVD is the ideal platform for low budget film makers. However, is there a risk that YouTube ‘cats in a box’ type of video will flood AVD? How are/can Amazon protect their quality brand image while having an open door policy to content providers, and what lessons can they learn from other major players that have a similar business model?
Apple and iTunes
Often cited as the man who dragged the record industry out of the dark age, Apple and iTunes founder Steve Jobs (1955-2011) is a man who seems to have passed (at least partially) into the realm of myth. The pre-iTunes record industry was flailing, and, despite the massive success of Napster, was sceptical about the profitability of the online music industry, and reluctant to expand into this new technology. Jobs was ahead of the game with iTunes, and ready to ‘save’ the industry with his online platform when they needed him most, and by 2010 iTunes downloads exceeded 10 billion (Telegraph.co.uk, 2016).
Apple, originally founded as a personal computer company in 1976, has grown into a multinational technology company worth $1 trillion (the Guardian, 2016). Apple products have entered into the global lexicon; iPhone, iPod and MacBook are brandnames synonymous with quality and it is not surprising that Apple regularly tops Forbes list of the worlds most valuable brands, with Amazon coming in at number 12 (Forbes.com, 2016).
In 2000 Apple purchased SoundJam MP, an online media player, and renamed it iTunes. At this time online music piracy was rife and the profitability of an online music platform was doubted. The Apple iPod was popular, but getting content was haphazard. This changed with the launch of the iTunes Music Store, an online music store built into the software. Critically, iTunes Music Store had the all the major record companies on board, meaning that Apple had control over the hardware, the software and the content (The Verge, 2016).
Podcasts are an iTunes staple, and uploading content is relatively straight forward. Although iTunes does not pay podcast creators directly, offering artists and broadcasters a platform enables them to earn through other means, advertising or subscriber pay services such as Kickstarter or Patreon (Forbes.com, 2016).
Unless you are an established Music artist with a substantial back catalog than it is unlikely you will be able to distribute your music directly through iTunes, and you will need to go through a third-party (Mashable, 2016).
In 2015 Apple launched Apple Music, an online music streaming service available for a monthly subscription. This is viewed as the beginning of a migration from the iTunes model of purchasing individual downloads to a subscription based access to the entire Apple music catalogue (the Guardian, 2016). After an initial three month trial period, subscribers will pay $9.99 per month for the service. Approximately 70% of revenue will be paid to the music owners, though, as stated above, how much of this the artist receives is dependent on their individual contracts (Business Insider, 2016).
Although in some ways Apple Music is closer to the Amazon Video model, for the purpose of scope, in this case Brand Quality, I will be focusing on a comparison between Amazon Video Direct and iTunes.
As consumer choice grows, the importance of brand management becomes ever more important, with business strategy, creativity and leadership critical aspects of this (van Gelder, 2005).
Audio content uploaded to iTunes is either a podcast or music. The process for uploading a podcast to iTunes is relatively simple; an Apple ID is required, an original title for the podcast, original artwork and the podcast itself in a suitable format (Blubrry Podcasting, 2016).
Musicians wishing to distribute their content on the iTunes store face a more difficult challenge and will most likely need to work through a third party – an Apple approved Aggregator. The Aggregator contracts vary, though they will generally charge artists per single (approximately $10) or album (approximately $60) published on iTunes. Artists are then entitled to all royalties from iTunes, approximately $0.70 per single track and $7.00 per album, though how much the artists themselves will receive is dependant on their contract with distributers and publishers (Mashable, 2016).
Like iTunes, an Amazon account is required to upload content to AVD. The film itself must be High Definition (HD), and a HD Trailer must be provided. Two versions of formatted art is required for thumbnails and backgrounds. Closed Caption subtitles must be included and Metadata for details of cast and crew (No Film School, 2016). The process is technical enough to deter casual posts, but not prohibitive enough to exclude amateur or low budget film makers.
In terms of content, the current United States top 50 iTunes podcasts (as of 10 November 2016) are made up of mainly Society and Culture, News and Politics, Technology, Arts, Professional, Comedy and Personal Journal related shows. Tell Me Something I Don’t Know, an educational panel show ranks first on the list, with TED Radio Hour in fourth place and Freakonomics Radio at number six (Okihika.com, 2016).
Information on top AVD movie titles proved more difficult to access, and only one Variety article listed the August statistics. 48 of the top 50 AVD titles for August 2016 were studio productions from Amazons ‘Digital Partners.’ These studios include Samuel Goldwyn Films and Alliant Content. Indeed, 10 of the top 50 are by Samuel Goldwyn Films, Including Bad Ass 2012 (5.5 IMDb), Tortilla Soup 2002, (6.5 IMDb). Many of these are re-issues of older productions, a HD version of Little Big Man 1970, makes number 7 (Spangler, T. 2016).
Two independent productions did make the top 50 AVD titles: In Memorium 2005, directed by Amanda Gusack (Number 22), and The Break-In 2016, directed by Justin Doescher (Number 33). Both films are low-budget found-footage style horror movies, both score less than 5 on IMDb, and less than a 2.5 out of 5 average customer reviews on Amazon.com (IMDb, 2016). That they are of the found footage horror genre is not surprising. There is a market for them, and films of this type are cheap to make and technically not challenging to produce (No Film School, 2016).
Unfortunately I was unable to find statistics for the top aggregated music on iTunes so am unable to make comparisons with content in this area.
In terms of Amazon learning from Apple, in one way the iTunes and AVD models are already very similar. iTunes uses aggregators as a barrier between themselves and the artist. This is in effect a filter. Only professional or semi-professional artist are likely to make the financial commitment to use an aggregator. AVD may not officially be using aggregators, they have two filter systems in effect:
The technical requirements needed to upload video to AVD will prohibit many ‘just for fun’ hobbyists. People taking videos of birthday parties are extremely unlikely to add closed caption to them, make a trailer, make artwork for them and upload them to AVD.
Amazons Digital Partner Studios occupy almost all of the top 50 AVD movie positions. This ensures a sort of ‘quality control’ of the content on behalf of Amazon. Although some of the productions may be perceived to be of poor taste (Fart: The Documentary holds the Number 13 position on the August 2016 chart), there are at least studios behind these productions. Studios with experience of producing marketable content.
In the ways Amazon and iTunes are similar: Operating a kind of gateway system. However, iTunes podcasts seem much more high-brow than the AVD content. This may be an audio medium versus visual medium issue, and many podcasts are specifically designed (or at least marketed) to make the people that listen to them more intelligent (Culver, 2016).
While Amazon Video Direct was launched with some fanfare in May 2016, website articles after this date, with data on AVD or the top performing titles are difficult to find. As are some of the titles themselves. There are certainly no instances of AVD titles ‘polluting’ the Amazon Video welcome screen. In this respect the Amazon brand is in no danger of being affected by the content of AVD.
The question as to why Amazon launched AVD remains a mystery. It provides an alternative in-road for Amazons Digital Partners, but seems to do little else. It is possible that Amazon felt they had to be perceived to open their doors to content providers, or at least be seen to, as part of an open and inclusive image.
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