Amazon Spending $100 Million on Original Content24 Jul, 2014 By: Erik Gruenwedel
New Prime memberships ahead of last year; so are the fiscal losses
Amazon July 24 said it spending more than $100 million on original content in the current third quarter (ending Sept. 30) as the e-commerce behemoth keeps pace with content spending by subscription video service rivals Netflix and Hulu Plus.
Meanwhile, Amazon reported a higher-than-expected Q2 loss of $126 million on revenue of $19.3 billion. It lost $7 million during the previous-year quarter.
Speaking on the company’s fiscal call, CFO Tom Szkutak’s disclosure of money being spent on original content underscores a growing trend among SVOD services and premium TV channels seeking to cement their brands through proprietary programing.
Amazon Studios in the spring approved production of six new original series, including Chris Carter’s “The After,” cop drama “Bosch,” two kids series and 30-minute comedies “Mozart in the Jungle " and " Transparent," in addition to renewing “Alpha House” with John Goodman, among others.
“We are ramping up the [content] spend from Q2 to Q3 significantly, and [total spend] will be a significant growth year-over-year,” Szkutak said, the latter referring to both third-party and original fare.
Amazon is also investing in a series of new pilots that will be streamed for free on Prime Instant Video and Amazon Instant Video for viewer feedback in the fall.
Szkutak said an uptick in free Prime trials in Q2 resulted in increased numbers of new Prime members, who continue to consume both physical (movie and music discs) and digital content.
The executive wouldn’t comment whether the $100 million spending benchmark would increase going forward. The figure is on par with what Netflix and Hulu are spending -- the latter receiving an influx of $750 million last year from corporate parents Disney, Fox and Comcast.
“We added more [net] Prime subscribers in Q2 this year than in Q2 last year,” he said. “They have great purchasing patterns, doing a lot of cross-shopping on physical as well as converting to paid digital video products. We are very pleased with what we are seeing there. That’s why we are investing in it.”
Notably, Amazon said it expects to lose $810 million in Q3, compared with $25 million last year, which Forrester Research analyst Sucharita Mulpuru attributed to the costs associated with free two-day shipping for Prime members.
“Amazon is spending all this money on shipping those orders," Mulpuru told USA Today. “[They have] created a beast they now have to feed.”