After jump-starting its moribund Studios unit with new leadership and a new programming direction amid continued Netflix growth, Amazon is now taking on competitors in several other entertainment sectors.
It marks an important new phase for Amazon, the world’s second-most-valuable company and one that already had a notable presence in streaming hardware, live-streaming and bundles of over-the-top programming. A series of new initiatives suggest it’s serious about far more than just providing yet another overlooked perk to Prime subscribers who mostly want to save on two-day shipping.
The moves could position the company to reap billions of dollars in additional ad revenues, while also powering sales of its own hardware as well as the millions of products on its online store.
The latest moves, reported across a series of publications in recent days, come a year after various controversies ousted former long-time Amazon Studios chief Roy Price and his top lieutenant, and other executives left for Apple’s nascent streaming-video initiative.
Amazon replaced Price with NBC Entertainment head Jennifer Salke, and pivoted to a string of pricey, broad-appeal franchises, including Jack Ryan, an action series based on the iconic Tom Clancy character that debuts this week, starring John Krisinski, as well as expensive investments in series based on Lord of the Rings and Conan the Barbarian.
The Studios still offer some of the awards-grabbing specialty fare that first helped it make a name, including Golden Globe-winning comedy The Fabulous Mrs. Maisel. But after Price’s departure, Amazon CEO Jeff Bezos famously demanded a very different approach (even down to moving hundreds of employees to new production headquarters on a storied Culver City, Calif., lot), and now has it.
Amazon is expected to spend as much as $5 billion this year on programming, to reach about 50 million regular users of the service as part of Amazon Prime. It’s also pushing hard into sports, including just hiring 19-year ESPN veteran Marie Donoghue to head its initiatives there that have included NFL, tennis and English Premiere League soccer matches.
That spending puts Amazon among the biggest spenders in Hollywood, even compared to many of the traditional studios. It’s trying to keep pace with Netflix, which has said it would spend $8 billion this year (some analysts put the true overall level at $12 billion because of long-term commitments) on 700 original films and episodic series. That includes acquisitions from numerous international markets such as Germany, Mexico, China, and India as Netflix tries to sate local programming appetites across 192 countries.
But even as Amazon pushes against Netflix, it’s aggressively taking on several other groups of competitors, too:
- Streaming device leader Roku. Amazon is developing a streaming app code-named Free Dive that would provide users of its Fire TV devices with exclusive access to free, ad-supported content, much as the Roku Channel does on Roku devices. Such an app also would compete with free, ad-supported channels such as Tubi and Pluto.TV, whose executives have told me they expect to build substantial audiences among bargain-hunting cord-cutters who want access to programming without having to buy a lot of subscription services. Analysts say Roku is well positioned to profit from ad revenues on its platforms, including from hundreds of smaller ad-supported channels that it carries. Amazon is already a digital-ad giant, thanks to millions of search ads on its ecommerce platform. Adding a streaming outlet could make Fire TV more attractive and also drive those revenues even higher, particularly if it can connect those ads to the products it’s selling.
- Live TV. In a move that some gamers griped about, Amazon this week tweaked perks for its Twitch Prime service, including ending ad-free streams on its live-streamed Twitch service. Up to 15 million people a day tune into Twitch, mostly to watch game-oriented content such as esports tournaments and the live commentary of 2.2 million monthly vloggers. The company has been trying to evolve the service beyond games. It provides creators a wide array of monetization options (indeed, it framed the end of ad-free streams as another money-making option for creators, though it will certainly keep its own share), and has been wooing non-gamer influencers. Amazon also has hosted a string of marathon replays of various beloved TV series, including one right now for all the Pokemon movies and TV shows.
- Pay-TV. Amazon Channels is the Prime-only overlay of additional available subscription channels, featuring about 20 options from HBO and Showtime, to Cheddar and PBS Kids. One shortcoming of the offering, which allows Prime subscribers to build their own alternative to traditional pay-TV, has been the lack of a way to capture live, linear programming streams. DVR capture is a routine service with major cable providers such as Comcast and Charter/Spectrum, as well as with “skinny bundles” (or, as colleague Alan Wolk now terms them, “mesomorph bundles”) such as YouTube TV. Amazon’s DVR product, code-named Frank and under development, would fill that hole.
- Premium Channels. Amazon has reportedly been in talks with Viacom-owned Paramount Pictures and Sony Pictures Entertainment about potential output deals. Amazon would put up both development and production funding, creating a much more central relationship with Hollywood’s two smallest “major” studios. That said, Paramount and Sony are basically what’s left to talk with. Disney bought most of Fox to outfit Hulu and its own streaming service (now coming in late 2019), and AT&T bought what is now WarnerMedia for its various pay-TV and mobile services. NBCUniversal is owned, of course, by Comcast, the biggest traditional cable-TV operator. One challenge for Amazon: both Paramount and Sony already have output deals (with Epix and Starz, respectively) that will last into early next decade. That may not be a big issue in late 2018, given the long development times of film projects. It still shows that Amazon is playing a long game in entertainment.
Unlike, perhaps, the grocery business or healthcare, which both have been relatively stable until they were disrupted by recent Amazon moves, entertainment’s incumbents haven’t been standing still, even beyond the big mergers.
In the past two weeks, for instance, Netflix signed deals with two more highly regarded creators who made their names working with Disney outlets. The biggest was a $100 million, three-year deal with Kenya Barris, creator of ABC hit Black-ish and hit movie Girls Trip. This week, the company signed a deal with hot young animator Alex Hirsch, whose Gravity Falls series from 2012 to 2016 was the biggest hit ever on Disney XD.
In the next couple of weeks, Netflix will showcase a record seven of its films at the influential Venice and Toronto film festivals, including the latest projects from Oscar winners the Coen Brothers and Alfonso Cuaron, and a restored version of the last film by late auteur Orson Welles.
But Amazon’s several entertainment initiatives suggest the company sees huge opportunities here, to grow its ad revenues, to showcase and sell products and even to make its voice-activated digital assistant Alexa more influential, even irreplaceable, than ever, by suggesting the shows we should watch and the advertisers’ products we should buy.