Amazon Is Reportedly Making a Free TV Service That Could Upend Roku

August 28, 2018, 11:36 PM UTC

The list of companies threatened by Amazon seems to grow by the month. To that list, we can now add companies that rely on revenue from video ads—especially Roku.

Amazon is getting ready to release a new video service that will be supported by ads, The Information reported Tuesday. The service will be available to the 48 million people who own Amazon Fire TV devices, including HDMI dongles made by Amazon or its Alexa-powered Fire Cubes.

IMDB, which Amazon bought 20 years ago, will develop the service. Amazon may name it Free Dive and offer it as a free alternative to Prime Video, with content such as older TV shows. Amazon already receives ad revenue from the video ads that IMDB runs before movie trailers. The company also sees ad revenue on its e-commerce store and has been running more ads on its popular Twitch gaming site.

The service as reported is similar to one that Roku has launched, the Roku Channel, which airs old movies like The Matrix and TV reruns like Bewitched and Good Times. Ads have been an important source of revenue for Roku. Roku’s stock was down 2% in after-hours trading Tuesday following the report about Amazon’s plans.

Advertising has quietly become reliable area of growth for Amazon in recent years. The company’s “other” revenue segment, which mostly comes from ad revenue, grew by 132% in the second quarter from a year earlier to $2.2 billion.

“It’s now a multi-billion dollar business for us,” Amazon CFO Brian Olsavsky said during the company’s most recent earnings call. “We’re seeing strong adoption across a number of fronts—Amazon vendors, sellers, authors as well as third-party advertisers who want to reach Amazon customers.”