Inside Amazon’s Offensive: How the Streaming Giant Plans to Win the Game

Groundbreaking Golden Globe wins for “Transparent” and deal with Woody Allen bolsters Prime Instant Video in streaming battle with Netflix, Hulu

Last Updated: January 20, 2015 @ 9:37 AM

With Amazon Studios’ foray into the movie business on Monday, throwing its weight behind 12 new movie productions a year, the online retail giant has opened a new front in a content offensive to battle streaming providers like Netflix and Hulu — and Hollywood studios.

The move follows Amazon’s groundbreaking wins at the Golden Globe Awards last week for original series “Transparent” and its star Jeffrey Tambor and the news that Amazon would be the home for movie auteur Woody Allen’s first TV project.

“We are on a bit of a run, and this is a great way to cap it,” Amazon Studios President Roy Price told TheWrap in an interview.

Amazon’s Prime Instant Video has a long way to go before it threatens Netflix’s dominance in the sector, but its high-profile push into TV and movies raises the financial stakes. And, like similarly aggressive recent plays by its deep-pocketed competitors, it’s good news for Hollywood creatives.

Amazon Studios spent between $1.5 billion and $2 billion on original content and syndication last year, mainly for serialized shows, according to a Bernstein Research estimate. Netflix and Hulu — a joint venture of Disney, Comcast and 21st Century Fox — are anteing up for original content as well.

The three will spend a combined $6.8 billion on content this year, RBC Capital Markets projects, at a time when production capital is scarce. While some of it has gone to established stars like Adam Sandler and Chelsea Handler, it also has created a major new market for producers, directors, actors and writers of all kinds.

Amazon made headlines in 2012 with its plan to solicit ideas and scripts for TV pilots from the site’s users. It let them pick the best to produce and then utilized their online feedback throughout the development process. Amazon’s similarly inclusive approach in its dealings with Hollywood talent and a creativity-first approach to producing is making a difference, said Price, whose father Frank headed Universal Studios in the 1980s.

That “creative vibe,” as he calls it, is reverberating even more loudly in Hollywood with the news of the studio’s push into movies, which will be led by indie film veteran Ted Hope.

“We want to make clear to the artistic community that this is a place where you bring that special project or script,” Price said. “You’re not writing it for the biz, you’re writing it for yourself, because you think it’s great. That creates emotions that are very genuine, and audiences respond to that,” he said, citing the “Transparent” wins as evidence.

Amazon

Amazon

That approach helped Amazon land “Transparent” creator Jill Soloway, who received a Directors Guild nomination last week too. The former executive producer on “Six Feet Under” considered HBO and Showtime as a home for the show about a man dealing with his family after coming out as transgender, before landing at Amazon.

Soloway was given a free rein on casting, which she used to stack the project with transgender actors. And when it began filming, there were no nagging notes from above.

“Normally at the networks you deal with a whole lot of people. At Amazon, I only dealt with (head of comedy) Joe Lewis,” she said in a DGA interview.

This was a formula that already successfully worked for Netflix, where David Fincher was given the freedom to make “House of Cards” as he saw fit.

A warm and fuzzy creative process is one thing, but translating it into subscribers and revenue is another.  Amazon trails behind its rivals on the latter. Subscription numbers are a closely guarded secret for Amazon as well as its rivals, but a recent survey offers some insights into the dominance of Netflix.

Wall Street’s Cowen & Co. polled more than 1,000 consumers, about 40 percent of whom said they were Netflix subscribers. Those customers reported watching an average of 7.7 hours of content per week,  almost double Netflix’s nearest competitor, Hulu Plus, which came in at 4.1 hours. Amazon Prime Instant Video users watched 3.5 hours the survey found, with HBO Go at 3 hours and Showtime Anytime with 2.7 hours.

Amazon is slowly gaining ground, and the cumulative effect of its recent moves will in time boost its viewership, according to Wedbush Securities analyst Michael Pachter, and that will enable it to further invest in content.

“If that happens, they can up their content spending to $2 billion, and that could help them grow even faster,” said Pachter, who believes that when the on-demand unit reaches critical subscriber mass, Amazon will spin off Prime Instant Video into an ad-supported free streaming service. Prime Instant Video is currently part of the package that consumers receive when they pay $99 for Amazon Prime membership, which guarantees free two-day shipping on all purchases.

“That’s an important difference between Amazon and the others,” Pachter said. “Their rivals have to grow their subscriber base, while Prime Video only has to make sure customers don’t quit Amazon Prime.”

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