Streaming video unlocks new opportunities for advertisers. The traditional modes of TV distribution do the best they can to target ads, but the delivery methods ultimately get in the way. Over-the-air TV can only target at the market level, which is extremely general. Cable gets down to neighborhood – groups of as few as 100 homes – but there’s not much affinity in such large groups beyond local merchants.

Streaming Can Address Individual Viewers

Streaming video does much better, selecting the individual home and sometimes the individual viewer. But there is still so little streaming that systems haven’t been developed to target the interests of specific viewers. This is about to change.

Amazon is in talks with sports leagues to bring live sports to the Prime streaming service. These talks are in a very early stage, so they could result in anything from exclusive rights to premium sporting events to long-tail programming that’s not available any other way. They could also resemble conventional bundles of programming like a cable package, or they could just blow up and produce nothing at all.

Streaming Can Leverage Retailing

Amazon’s retailing business is one of the keys to making a deal the company can afford. As the Wall Street Journal points out, Amazon can monetize long tail programming in ways that others can’t:

The company may first grab a toehold in the “long tail” of sports, like lacrosse, gymnastics or surfing, sports executives say. Amazon executives believe the e-commerce giant can uniquely target a lacrosse viewer with lacrosse gear, for instance, allowing Amazon to land a greater return on a sports investment, people familiar with the matter said.

Long tail programming – events with limited audiences – aren’t worth the transaction costs of carriage for a fee without more in license fees that the typical carrier would want to pay, but the opportunity to monetize the programming further with retail sales changes the math.

Integration Sets Amazon Apart from the Others

The Big Kahuna of streaming, Netflix, has shown very little interest in carrying any kind of sports programming. This is because Netflix sees its business as nothing more than time-shifting, and most sports fans want to watch games live or semi-live.

They might start a game a little late so they can skip commercials, but they generally want to see the end in real time, all the better to interact with other fans on social media. But Netflix is fixated on having a library of old content that people can watch without commercials; it’s the ultimate replay system.

While Amazon and Netflix once seemed like competitors, it’s clear that Netflix has won the race for original content. Amazon has some nice shows, but the volume of its content isn’t even close to the Netflix library.

Two Business Models

This all comes down to free cash: Netflix has a lot because they charge enough to pay for content, while Amazon simply uses Prime TV as a way to sell Prime memberships oriented around its retail sales

Given Netflix’s belief in avoiding sports and Amazon’s refusal to run its streaming service as a stand-alone line of business, there’s no real competition between the two firms. They probably like it that way. But there are other ways to run a streaming service.

Cable-like Streaming

Dish Network’s Sling TV service is more like traditional cable. And the same goes for PlayStation Vue, the Sony service that uses game consoles and similar devices for video streaming.

The virtue of these systems is their ability to substitute for a cable TV subscription at a potentially lower price. They’re also portable, like the TiVo service that requires a cable plan.

Both Sling and Vue provide access to live sports, but in the conventional form: it comes from ESPN, TNT, and the other cable channels. Both provide access to local market, OTA programming and foreign language shows in Spanish and Hindi.

Cable Company Streaming

Comcast, of course, offers its own streaming service, a skinny bundle known as Stream which isn’t as terrible as you might think:

Putting aside the bizarre restrictions—which Comcast is apparently hoping to lift over time—Comcast Stream is a better deal than HBO Now, the much-ballyhooed standalone streaming version of HBO that launched a few months ago.

Both services cost $15 per month and offer full access to HBO’s on-demand catalog on phones, tablets, computers, and connected TVs. But while standalone HBO subscribers must use the HBO Now app, Comcast subscribers can use HBO Go, a separate app designed for cable subscribers.

The richness of Comcast Stream service is likely to improve as more people walk away from fat cable bundles, but no sooner.

The Streaming Landscape

So this is the streaming landscape: cable companies are offering streaming services to keep cord-cutters connected, media companies like Sony, HBO, and Netflix are dealing direct with customers with new bundles, and retailers are testing the waters with novel business plans.

These firms are competing with each other – and avoiding each other – on several fronts. First there are content plays, some of which attempt to lock up exclusive deals. That model flows from the very successful NFL Sunday Ticket play that put DirecTV on the map.

Second, there’s the question of device support. Ideally, streaming services want to offer service on Roku, Apple TV, Amazon Fire, Google Chromecast, Sony PlayStation, Xbox One, and a host of other devices that can handle video such as smart TVs.

Pricing: The Final Frontier

Then there’s pricing, where targeted ads and premium packages come into the mix. We’re used to broadband networking at prices below the cost of standalone service because infrastructure expense has always been shared with other services.

Cable companies only had to charge an incremental price for Internet because they could count on TV revenues to pay for at least part of the cable plant. Telephone companies were also able to price broadband below cost because they (once) had telephone revenues.

But those services are fading out, so we need new business models if we don’t want prices to rise, which we don’t.

Streaming as an Adjunct

Streaming opens up opportunities to explore new business models the way Amazon appears to be doing. It also allows traditional cable and phone companies to enter national markets, as Comcast and AT&T are. It provides ways to pay for original content, as Netflix and HBO do.

And it offers a way to leverage investments in wireless networks, which is going to get a robust tryout if present trends are allowed to continue. Verizon and AT&T are both developing the means to combine mobile broadband with streaming.

AT&T seems to be quite serious about designing new business models for streaming, original content, mobile networking, and other forms of entertainment such as Augmented Reality. This is the point of the DIRECTV “Data Free TV” service that streams a full cable package to mobile devices without additional data fees.

Regulatory Concerns

It’s not surprising that the Wheeler FCC is wringing its hands over Data Free TV. Regulators always fear market disruption, the very thing that brings new benefits to consumers. Fortunately, the current leadership of the FCC is in its final days.

But nobody knows what the next FCC will bring to the table in terms of antitrust and technical analysis. The Trump FCC transition people – antitrust expert Jeff Eisenach and regulatory scholar Mark Jamison – tend to view telecom regulatory issues through a different lens than traditional telecom regulators.

Despite what the echo chamber is saying about these two, you can expect they will seek to inject some analytical modes into our hidebound telecom regulator that will surprise casual observers.

I’ll have more to say about them in the next post.