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Amazon CFO: Prime Video Content Spend Exceeds Subscriber Engagement

2 Feb, 2017 By: Erik Gruenwedel



Amazon Feb. 2 said that despite doubling the number of hours Prime subscribers streamed video and music in 2016, spending on original movies, TV shows and e-books is exceeding consumer engagement.

“We’re certainly spending ahead of the value of the [viewer] engagement now, but it’s a good sign that [engagement] is building,” CFO Brian Olsavsky said on the company's fiscal call.

Among increased content spending, the executive cited global access to Prime Video launched in December shortly after the premiere of “The Grand Tour,” the platform’s most-expensive original series, and starring the original cast of BBC hit “Top Gear” — Jeremy Clarkson, Richard Hammond and James May.

“We see a double benefit of the global Prime Video program, both to amortize the cost of the original content, but also to show that we are doing original content for more and more people,” Olsavsky said.

The e-commerce giant in December said it doubled original fare spending, which could be around $3 billion when factoring the $1.3 billion spent in 2014 — the last time actual numbers were divulged. Netflix, by comparison, will spend $6 billion this year.

Analyst Michael Pachter with Wedbush Securities estimates Amazon spent close to $1 billion on original and licensed content during the quarter, up at least $300 million year-over-year.

To help justify spending, Olsavsky said a key data point is subscriber “usage patterns,” as they relate to Prime services, including video.

While original shows such as “Mozart in the Jungle,” “Transparent,” “Goliath” and feature film Manchester by the Sea garner Golden Globe wins, Olsavsky said a bigger accomplishment is that subs have responded “really well” to the programming. 

“We’re happy with the engagement customers have [with Prime Video]," he said. "We’re also happy, on the studio side, with the people we’ve been able to work with."

The executive added that the increased fixed-cost content spending can now be amortized over a larger user-base following Prime Video’s access in 200 countries.

“Yes, the investment [in content] did step up … in the fourth quarter, including marketing; that will continue in 2017 and likely beyond,” he said.

Olsavsky declined to comment on whether Amazon has plans launching an online TV platform similar to Sling TV and DirecTV Now — with or without third-party pay-TV operators.


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