Amazon Upping Content Investment in LoveFilm, Prime Streaming

25 Oct, 2011 By: Erik Gruenwedel

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Ecommerce behemoth touts acquisition of London-based disc and streaming rental platform and user traction for Amazon Prime streaming — Netflix’s biggest SVOD competitor

Amazon is ramping up content investment in its London-based LoveFilm disc and streaming rental platform, in addition to the Amazon Prime membership service offering free movie streams.

In an analyst call Oct. 25 to discuss third-quarter results, CFO Thomas Szkutak said management remained upbeat on its ownership in LoveFilm and rollout of movie streams for Amazon Prime subscribers.

“We are happy with the traction we are getting with Prime,” Szkutak said. “Customers absolutely love it. We have a lot of customers who are requesting free trials, and then the converting base [to paying] on those free trials.” 

The CFO said it still was early in the rollout of Prime SVOD, and would be continually monitored, including content additions, during the next 12 months.

“We like what we see so far,” Szkutak said.

The CFO said Amazon would continue to acquire content from U.S. media companies for both its transactional VOD and SVOD businesses, in addition to LoveFilm.

“We have been investing in content since acquisition," Szkutak said.  So ... you should expect us to continue to invest in LOVEFiLM. We think it's a graded opportunity. The business is doing very well. We're very pleased with how the team is working and we're very excited about that opportunity.”

Indeed, Amazon during the quarter inked deals with 20th Century Fox Home Entertainment and PBS that enable its Prime members to stream a broad selection of catalog movies and TV shows. The deals brought the total number of Prime instant videos to more than 12,000 movies and TV shows from partners such as CBS, FOX, PBS, NBC Universal, Sony and Warner.

“It is certainly impacting our guidance,” Szkutak said, without elaborating.

Amazon shares fell 15% in after-hours trading Oct. 25 after the ecommerce giant reported a 73% drop in third-quarter (ended Sept. 30) net income to $63 million compared to income of $231 million during the previous-year period.

The decreased earnings were due in part to start-up costs surrounding the pending launch of the Kindle Fire tablet computer.

Seattle-based Amazon said net sales increased 44% to $10.88 billion, compared with $7.56 billion in third quarter 2010. Excluding the $371 million favorable impact in foreign exchange rates, net sales would have grown 39% compared with last year.

Media revenue, which includes DVD and Blu-ray Disc movies, video games, consoles, transactional video-on-demand, books and music, increased 21% to $1.9 billion from $1.6 billion last year.

Amazon, which launched pre-orders for the Kindle Fire tablet computer Sept. 28, said pre-orders of the device have doubled the previous launch of the Kindle Reader.

“Based on what we're seeing with Kindle Fire pre-orders, we’re increasing capacity and building millions more than we’d already planned,” CEO Jeff Bezos said in a statement.

Amazon shares fell to $192.71 per share in after-hours trading, down nearly 15% from $227.15 per share at the market close.

Amazon’s Spanish-language website, Amazon.es, bowed Sept. 14. The first product it sold was Star Wars: The Complete Saga on Blu-ray Disc.
 

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