Amazon's IMDb will announce this week a new free video service to compete for TV ad dollars

Key Points
  • Amazon is expected to announce a free, ad-supported video service on Fire TV which will feature libraries of past TV shows and movies, five people who have had talks with the company told CNBC.
  • The offering, which is similar to The Roku Channel and Hulu, will let advertisers use Amazon's first-party data and third-party consumer information to target advertising.
Jeff Bezos, founder and CEO of Amazon
Brent Lewis | Getty Images

Amazon subsidiary IMDb is expected to announce this week a free, ad-supported video service for Amazon Fire TV users, according to several people with knowledge about the matter. The new service, which will be similar to The Roku Channel or some parts of Hulu, will feature TV shows and movies. It will be available to all Fire TV users, not just Amazon Prime Video users.

News of the video service was previously reported by The Information.

The move could help Amazon capture revenue from the lucrative TV advertising market, which is expected to generate almost $70 billion in revenue in the U.S. this year according to eMarketer. Advertising budgets for over-the-top services, where people can watch TV without a cable or satellite subscription, are only about $7 billion, according to Merkle. But the market is growing rapidly.

The service will also help Amazon continue to grow its share of the digital advertising market, which is dominated by Google and Facebook. According to eMarketer, Amazon is now the third-largest digital advertiser, with about 4 percent of the market; Google and Facebook combined have more than 57 percent.

On the new service, advertisements can appear between content, and marketers will be able to wrap ads around an embedded video "player," similar to the experience on many web sites. Amazon already allows commercials on content on Fire TV apps, but this would vastly expand the offering and allow for more insights from Amazon's massive user base.

To lure more brands, Amazon will allow marketers access to its proprietary data to help target video advertising for the first time on Fire TV, one agency executive said. Amazon is expected to account for about half of the U.S e-commerce market by the end of the year, per eMarketer. Companies can combine that information with third-party data on consumers to help advise where they want to put their ads.

The company has been in discussions with at least three major media companies to bring their programming to the new Fire TV service, according to sources familiar with the talks. Content will include libraries of past shows and movies. An advertising executive said Amazon has considered creating an ad-supported Prime Video version of the service as well. Amazon said it has no plans to offer a free, ad-supported version of Prime Video.

The announcement will be made this week during Advertising Week in New York, two people said. Amazon declined to comment on the other reports in this story. 

Note: CNBC parent company NBCUniversal is a part owner of Hulu.

Amazon's Fire TV Cube is a must-buy if you hate losing your remote
Amazon's Fire TV Cube is a must-buy if you hate losing your remote