“Broadcast wars” are widely understood to be a clash of content titans fighting for a consumer entertainment wallet. But behind the scenes, another intense commercial fight is taking place between streaming services and the industry’s two connected television heavyweights: Roku and Amazon.
WarnerMedia released HBO Max in late May and, more than six weeks later, it is still not featured on Roku or Amazon Fire TV. Coming soon is Peacock’s national debut on July 15 on NBCUniversal, and it’s also unlikely to be on either platform, sources say.
The clashes, of course, revolve around money. More than that, distribution disputes have to do with long-term strategic access to fast-growing audiences in the first place, as well as advertising inventory. A media company executive says Roku and Amazon are asking for “heinous” terms. On the other hand, an expert at one of the over-the-top platform providers says they are simply looking for “a reasonable share” of the value they create for partners, adding that companies like WarnerMedia and NBCU are coming to the table with a “old television mentality”.
The leverage of OTT platforms is real. Both say they have more than 40 million active (and growing) accounts. “Amazon and Roku are beginning to play hard with many of these services,” says Parks Associates analyst Kristen Hanich. “They are much more powerful than they were three years ago.”
The blackouts are similar to disputes over television networks with cable and satellite operators. And many in the industry expect them to continue.
For WarnerMedia, the absence of HBO Max on Roku and Fire TV has caused confusion and probably delayed registrations. The AT&T-owned company’s plan was to convert legacy HBO to HBO Max for the same monthly price of $ 14.99, on the theory that the increased content will attract new customers.
But the dead end with Roku and Amazon has thrown a key in that. WarnerMedia’s HBO Now app deal for Fire TV expires on July 31, sources familiar with the dispute told Variety. So, unless the parties can agree to an HBO Max pact before that, Fire TV users will no longer have access to an HBO app (but they will be able to stream HBO content on the devices via Prime Video). Roku has an agreement to maintain an “HBO” app, which is replacing HBO Now as of August 1, as talks about HBO Max continue.
A central point: WarnerMedia wants to remove HBO from Amazon’s Prime video channels and Roku channel. That’s so the media conglomerate can keep customers within the HBO Max app experience, giving it the ability to collect data for recommendations and (in the future) ad targeting.
Apple, which offers the HBO Max app, has agreed to stop selling HBO through Apple TV channels. But Amazon and Roku resist.
“They want to add all of this content into a central experience,” says an industry executive familiar with the conversations. “But Netflix is never going to do that. Hulu will never do that. HBO did it from the beginning, and now Amazon and Roku have a real problem because if HBO is not on their channels, that model falls apart. ”
In fact, the channel aggregation business has become lucrative for Roku and Amazon. According to Amazon, nearly 5 million HBO subscribers access the service through Prime Video Channels. Overall, nearly a third of American consumers who subscribed to a streaming service in the past 12 months used aggregation services at Amazon, Roku, and Apple, according to a Parks Associates study conducted in the first quarter.
In a statement, WarnerMedia said: “We hope to reach agreements with the few remaining outstanding distribution partners. [for HBO Max]even with Amazon and on par with how they provide customers with access to Netflix, Disney Plus and Hulu on Fire devices. “
Meanwhile, Peacock chief Matt Strauss tells Variety: “We are certainly involved in discussions with each platform,” and says that NBCU is open to various forms of “value sharing” in such deals.
For transmission services, the problem is not the distribution of income per se. (Roku takes a standard cut of 20% from subscription fees, while Amazon’s take is believed to range from 15% to 45%.) Apple and Google cut a comparable share of the subscription dollars that flow to through their platforms.
The issues are the extras Roku and Amazon want to include, including ad inventory (Roku’s standard request is 30%), rights to resell services in their channel stores, and “free content” for the Roku Channel with advertising and IMDb TV. Roku also requests a marketing spend commitment from partners, which, among other things, gives their channels the preferred menu location. (Roku and Amazon declined to comment on specific trading points.)
Roku and Amazon are possibly a duopoly, says one media executive: “It’s the classic ‘Put everyone on the platform’ and then change the game.”
Companies in these disputes understand that app blackouts are frustrating for their respective consumers. But, as an OTT platform executive says, “We are not going to do bad business just to get a new streaming service on the platform.”
Andrew McCollum, CEO of low-cost TV streaming provider Philo, acknowledges that there are unavoidable disagreements about economic terms with the platforms. “I think it will be more conflictive over time,” he says. Like cable and satellite TV companies before them, platforms like Roku, Fire TV, and Apple TV are becoming increasingly powerful gatekeepers.
McCollum says: “‘Direct to the consumer’ is a bit of a myth.”
