Amazon set to double down on video spend and triple its original content as it climbs the ranks in streaming space
Amazon is taking a large step up in its content spend in the second half of this year, announcing it will nearly triple its number of new Amazon Original shows in the latter half of 2016 compared to the same period in 2015 as it looks to steal eyes from Netflix.
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The internet giant announced its content plans on an earnings call yesterday (28 July) as it reported its fifth consecutive quarter of profit growth. Amazon has made no secret of its plans to extend its dominance of the online media space to original content, with a recent report by network hardware company Sandvine revealing its Amazon Video service in the UK, US, Germany, Austria and Japan accounting for 4.3 per cent of downstream traffic during peak evening viewing hours.
Little wonder then why Amazon is pumping even more money into the burgeoning part of its offering.
In the call Brian T. Olsavsky, senior vice president and chief financial officer at Amazon, said: “We have a great slate of new Amazon Originals coming out later this year, both in the U.S. and internationally. And we're nearly tripling our number of new Amazon Original shows – TV shows and movies compared with the second half of last year.”
Olsavsky pointed to Amazon’s cloud service AWS - its most profitable segment - and its bet in India - a market in which Prime will soon launch after Amazon pledged to invest $5bn two years ago - as investments that are “increasingly sequentially”. This helped Amazon bank $857m in profit, with sales surging from $23.19bn to $30.4bn in one year. Its operating profit margin rose to 4.2 per cent - more than twice as much as the 2 per cent from 2015.
Yet despite the obvious profitability of AWS, Olsavsky said the two biggest issues in its third quarter (July - Sep) are the “operational ramp up” and the increase in digital content spend.
This will include its big bet on original content, which so far has helped the internet giant become the third most streamed online video service this year, behind Netflix and Youtube. The original content model was championed by Netflix through its popular series ‘House of Cards’ and ‘Orange is the New Black’, but Amazon has proven its skill in the space with similarly acclaimed shows ‘Man in the High Castle’ and ‘Mozart in the Jungle’, among others.
Netflix also announced it will spend more on original content to attract more subscribers, with the company adding only 1.68m users in the three months to June - well below its forecasts of 2.5 million. Netflix's chief content officer Ted Sarandos told a television audience on Wednesday (27 July) that the streaming giant will continue to increase spending on both original and licensed content beyond the $6bn it spent this year.
As well as original content, the company is also spending big to gain content rights, reportedly paying Top Gear trio Jeremy Clarkson, Richard Hammond and James May $250m for three years and 36 episodes of its new motoring show the Fifth Gear.