Amazon’s Investments in Film and TV Dragged Down Profitability, CFO Says

On an earnings call, Brian Olsavsky said resources dedicated to content are nearly doubling every year

Last Updated: October 27, 2016 @ 3:16 PM

Amazon’s stock plummeted nearly 7 percent in after-hours trading on Thursday, after the e-commerce behemoth reported earnings that fell well short of expectations — particularly on the profit side. And one big culprit behind those disappointing numbers: Its own award-winning original content.

On a conference call with analysts following the earnings release, Chief Financial Officer Brian Olsavsky said the company has been significantly stepping up its investments in programming, which include original series like “Mozart in the Jungle,” winner of the 2016 Golden Globe Award for Best Television Series – Comedy, and “Transparent,” winner of multiple Globes and Emmys. Amazon Studios also produced the feature film “Manchester by the Sea,” which is getting some early Oscar buzz.

But developing all that quality content comes at a cost. The company reported third-quarter earnings of 52 cents a share, well short of the 78 cents projected by analysts. Olsavsky said Amazon’s ever-increasing investment in film and TV was a major factor in its lower-than-expected profitability.

“Video content and marketing associated with that is nearly doubling year over year,” Olsavsky said on the call. “It continues to be a large increase in [the third and fourth quarter].”

Amazon’s original content is available on its Prime Video service, which is included with its $99-a-year Prime e-commerce subscription service and gives members free two-day delivery on thousands of items. Prime Video can also be purchased as an $8.99 a month standalone subscription, and is currently available in the U.S., U.K., Germany and Japan. Olsavsky said India will be the next market.

He also emphasized that the company tends to hold worldwide rights to the programs it’s produced through its studio unit, which should increase in value as Prime Video expands to more markets.

“The content that we are creating through Amazon Studios we are generally holding the worldwide rights to,” Olsavsky said on the call. “We consider that to be very valuable.”