Aside from Netflix, Amazon has been one of the most eager streaming platforms to create original content. In 2017, the company invested around $4.5 billion into its content budget and walked aways with the global TV rights to IP including “Lord of the Rings,” which cost the company $250 million. The e-commerce giant has also invested tens of millions of dollars into shows like the Emmy Award-winning series “Transparent,” about a transgender father and his family, and “Good Girls Revolt,” a critically-acclaimed show about gender inequality in a New York newsroom. However, the big question remains: is the investment paying off?
Amazon has never released Prime Video member numbers publicly, but thanks to a report from Reuters, we can now put company’s video audience at around 26 Million as of early 2017. That subscriber number puts it right in-between Hulu (17M subs) and Netflix (56M US Subscribers). Reuters calculated the number using internal documents at Amazon, which showed how many viewers a TV series had as a percentage of total Prime Video customers.
The internal documents also compare metrics for 19 shows exclusive to Amazon: their cost, viewership and the number of people they helped bring to Prime. Additionally, the documents show what Amazon considers to be the financial logic of its strategy, and why the company is now making more commercial projects in addition to high-brow shows aimed at winning awards, according to Reuters who spoke with two people familiar with the matter.
For example, the first season of the drama “The Man in the High Castle,” an alternate history depicting Germany as the victor of WW2, had 8 million U.S. viewers as of early 2017, according to the documents. The program cost $72 million in production and marketing and attracted 1.15 million new subscribers worldwide. Amazon calculated that the show lured new Prime members at an average cost of $63 per subscriber. Which is well below the $99 a year subscriber fee the company charges for its service.
A person familiar with Amazon’s strategy told the news organization that the company credits a specific show for attracting someone to start or extend a Prime subscription if that program is the first one a customer streams after signing up. That metric is known as a “first stream.” The company then calculates how expensive the viewer was to acquire by dividing the show’s costs by the number of first streams it had. The lower that figure, the better, according to the report.
Not all Amazon originals have paid off as well as “Man in the High Castle.” For example, “Good Girls Revolt” had total U.S. viewership of 1.6 million but cost $81 million, with only 52,000 first streams worldwide by Prime members. The series’ cost per new customer was about $1560, according to the documents. Which is likely the reason amazon canceled it after one season.
Amazon is now working on more commercial dramas and spin-offs with appeal outside the United States, where Prime membership has far more room to grow, sources told Reuters.