Video Content Gatekeepers: Amazon, Apple, Google, Roku

Executive Summary:

  • Google pulls YouTube support from Amzn Echo Show/FireTV
  • AppleTV adds Amzn Prime Video
  • All sacrificing core horizontal businesses (YouTube, Amzn e-comm, iTunes) to strengthen position of vertical video device / OS products (ie. content discovery gatekeeper status)

What it Means:

  • Inevitable conflicts from simo competing horizontally & vertically
  • OTT is rarely DTC – there will always be a Tech CO intermediary
  • Media COs should focus on indispensable content
  • Explore opportunities to diversify business


Google Pulls YouTube Off of Amazon devices

In a statement this afternoon (Tuesday, 12/5), a YouTube spokesperson announced that the company was withdrawing support for its service on both the Echo Show and, more importantly, Amazon’s Fire TV

The Verge

Here’s the sequence of GOT events that have led us to this GOT moment:

  1. In September, YouTube pulled its programming from Amazon’s Echo Show device (The Verge)
  2. Shortly after, Amazon stopped selling the Nest E Thermostat, Nest’s Camera IQ, and the Nest Secure alarm system (Amazon)
  3. Two weeks ago, Amazon got YouTube back on the Echo Show by simply directing users to the web version, a workaround that left a lot to be desired (The Verge)
  4. Now Google has disabled YouTube browser access from the Echo Show AND Fire TV

What’s really going on here?

Both companies are sacrificing the reach of their core businesses:

  1. YouTube, which maximizes ad revenue by reaching as many people as possible, just cut YouTube off from as many as 36M people:

  1. Amazon, branded as “the everything store”, no longer carries Google products
For bonus points, try asking Alexa to order you a Chromecast and see how she responds. I was offered a Fire TV stick, then a Roku, before she ran out of options. (The Verge)

Why the sacrifice?

Amazon and Google are in an all-out battle for the home and becoming the dominant video content interface is the home’s holy grail.

Today, home devices are all about playing music, listening to news briefings and ordering the occasional groceries (more next week), but both Amazon and Google are working to make home devices, and their accompanying virtual assistants, the interface of video content:

The stakes for becoming the interface of video content are high. The interface of video content gains significant influence over content discovery.

As Stratechery’s Ben Thompson summarizes here and visualizes in the smiling curve below, in the internet age of content abundance, the companies that control content discovery, capture the most value:

The Smiling Curve for publishing

The reason is that the rest of the content value chain has to conform to the demands and design of the content discovery gatekeeper in order to survive. Tangibly, these video content gatekeepers capture the following value:

  1. Higher reach and conversion rates of video subscription services (Prime Video, YouTube TV)
  2. Nearly complete access to viewer behavior and preference data
  3. Affiliate revenue from other OTT services offered through the platform

Amazon and Google aren’t the only tech giants fighting to dominate the video content interface.

Amazon Prime Video comes to Apple TV

It’s here at last: the Amazon Prime Video app is now available for the Apple TV.

The Verge

I think a strong argument can be made that this reconciliation fits the same theme – Apple is sacrificing iTunes video revenue in favor of its video content interface.

Here’s my inferred sequence of events that led to Apple’s ultimate decision:

  1. Apple TV was the original smart set-top box and digital video OS combo
  2. For 3+ years from when Amazon’s Prime Video app launched, Apple TV did not support it because its services compete directly with iTunes (movies & shows for purchase)
  3. Prime Video is now so popular that customers are dropping Apple TV for Prime Video supporting alternatives
  4. Apple is now allowing Prime Video to compete directly with iTunes on Apple TV (tvOS) to maintain Apple TV customers

Apple has immensely benefitted from the close direct relationship its developed with customers through the iPhone and other devices. It is fighting for the same rewards as Amazon and Google are in home video content – maintaining that customer relationship.

The major sacrifices these tech giants are making clearly demonstrate the challenges of simultaneously competing horizontally (Amazon Prime, YouTube, iTunes) and vertically (Fire TV, Chomecast, Apple TV). Which is why a company without the inherent conflicts of interest of a horizontal money maker may be best positioned to become the defacto video content interface:

Despite being unprofitable, Roku trades at a 10x+ revenue, $4.3B market cap.


Investors see Roku’s advantage as a service neutral video device and operating system and are pricing significant future growth expectations into its valuation because of it.

What this means for media companies:

The fight over becoming the gatekeeper of video content demonstrates the value of being close to the customer. And while over-the-top services (OTTs) do provide significant control and access to data, they’re generally not really direct to consumer.

In most cases, subscribers are accessing OTTs through the video content gatekeepers: Apple, Google, Roku, and Amazon. At last check:

  • Affiliates keep 15-33% of DTC subscription revenue
  • Through an affiliate such as Amazon Prime video significant, if not all, access to viewer usage data is lost

So how can media companies compete?

  1. Always explore opportunities to close the gap between content and viewers, but also respect the likely futility of efforts that do not intelligently offer a unique value proposition
  2. The need to conform to content discovery gatekeepers, in most cases, is inevitable. But going back to the smiling curve:

The Smiling Curve for publishing

There are still significant opportunities to capture value by creating content that is indispensable to viewers, and therefore content discovery gatekeepers.

Especially in the somewhat likely scenario that no one company becomes the content discovery gatekeeper – the players remain fragmented.

By creating content that is indispensable to a significant market segment, media companies maintain negotiating leverage against content discovery gatekeepers.

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