Amazon.com Inc is rapidly ramping up the billions of dollars a year it spends on licensing and creating TV shows and movies, signaling the retailer plans to be in show business for the long haul.
The issue came to the forefront of investors’ attention last week, when Amazon stated a step up in its own spending on movie jobs could be one of many reasons it may report a loss this quarter, even as it anticipates more than $39-billion in total sales.
The stocks of the company, though up 33 percent this year, have dipped 5 per cent.
Wall Street analysts estimate Amazon’s spending material will have tripled to more than $4.5-billion at the end of the year from 2014.
Catching customers’ attention with movie represents one of the main investments of the company, people said. Spending amounts doesn’t break out, and it declined comment.
This year the business has increased its footprint considering launching a studio and picked up its first Academy Awards.
“We expect Amazon to quickly exceed Netflix’s yearly spending on movie,” said Needham amp; Co analyst Laura Martin, who estimates that Netflix Inc, the top online television service, will spend $6-billion on content this season.
MEANS TO AN END?
The fast-growing investment in initial video is only one of several simultaneous moves by Amazon into new areas, such as brick-and-mortar retailing with its planned acquisition of Whole Foods Market Inc..
Amazon has provided little detail for investors why, or on where it’s spending extra on material, which makes it tough to evaluate whether the investment is currently working. It has said video is an integral advantage of its own Prime shopping club, whose members have a tendency to buy goods .
“When we win a Golden Globe, it will help us sell more shoes,” Chief Executive Jeff Bezos said in a Recode tech conference this past year. “People using Prime Video … renew at higher prices, and they convert free trials at higher rates.”
One of the people knowledgeable about the operations of the company said Amazon has economists and information scientists conducting computer models to ascertain how video influences whether shoppers sign up after a trial period for Prime.
Subsequently, deciding the funding for spending that was movie involves a complex set of factors, such as subscription fees and spending by Prime members’ value, the person said.
SUCCESS NOT ASSURED
Despite its award wins for distributing “Manchester by the Sea” and producing TV shows such as “Transparent,” Amazon’s Hollywood push hasn’t been entirely successful.
An early plan to allow anyone submit opinions and online an attempt to disrupt the lengthy and costly greenlight system of Hollywood — has been abandoned.
Some have voiced concern that Amazon is currently focusing on niche audiences that are Prime Video users, such as jobs with director Woody Allen.
Costs mount. Amazon paid $10-million to score distribution rights to “Manchester by the Sea” — one of the biggest deals ever in the Sundance Film Festival. And it’s paying about $50-million to flow 10 Thursday-night games to the U.S. National Football League this season, five times what Twitter Inc had paid for the very same rights.
The frugal company threw a sign it hasn’t managed to shave off as much of Hollywood substantial prices as it may have expected, awards show celebrations, also.
“The bets they need to create on content are subject to the vagaries of the film industry,” said Paul Verna, an analyst at research company eMarketer. Being in Hollywood is “completely different from being a data business or a tech company or a apparatus company.”