Amazon In Talks To Create Online Cable Competitor, But Don’t Hold Your Breath

Amazon is already a major player in the streaming video rental and subscription business, competing against iTunes, Zune, Google Play, Redbox, and Netflix. But does the e-tail giant have its eyes on more-established competitors? A new report claims that Amazon is looking to create its own live pay TV service that would pit the company against cable operators.

According to the Wall Street Journal, Amazon has talked to at least three major entertainment conglomerates about creating channels for this possible online TV service.

The company faces the same roadblocks that others, including Sony and Google, have come up against — namely that the content providers fear they would aggravate the cable providers with whom they have already established relationships.

Many of the cable/satellite blackouts or threatened blackouts in recent years have been tied to negotiations over streaming video rights. Cable companies don’t want to pay much for the rights to stream content they already provide on TV and via on-demand, while the broadcasters feel like they are getting nickel-and-dimed.

Making a deal that would give Amazon the ability to launch an online alternative to cable companies would only anger the Time Warner Cables and Comcasts of the world.

Additionally, with a federal appeals court recently tossing out the core of the FCC’s net neutrality rule, Internet service providers are now free to charge huge fees to competitors or outright block access to competitors. Since the nation’s largest cable operators are also its largest ISPs, we could easily see Verizon and Time Warner Cable doing everything they can to prevent unfettered access to an Amazon TV service.

(Comcast is currently unable to exercise this option as it agreed to abide by the FCC’s Open Internet rule through 2018 as a condition of its merger with NBC.)

There is also the issue of local TV broadcasts, which most consumers have become used to getting as part of their cable or satellite package. While Comcast might not be able to block online subscribers’ access to competitors’ services, it could try to make sure that any competing service will never be able to afford the retransmission fees for NBC owned-and-operated local stations.

Of course, if streaming service Aereo wins out in its Supreme Court battle against the broadcasters, Amazon could get around retrans fees by launching a similar service (or by buying Aereo).

This is all a very long way of saying that while it’s not impossible that Amazon could launch a successful online cable service, it s currently a long shot. More than likely, it seems like this kind of online-only service will come from one of the existing cable powerhouses.

UPDATE: A rep for Amazon tells Seattle Times reporter Jay Greene that Amazon is “not planning to license television channels or offer a pay-TV service.”

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