Amazon’s planning to “significantly” increase its spending in video content as it gets more serious about taking on Netflix in the online video-streaming space.
During its earnings call with the press on Thursday, Amazon CFO Brian Olsavsky stressed that the company’s seeing better engagement and conversions from Prime members who use the video service, and that a lot of future investments will focus on boosting video offerings.
“One of the larger investments is our content spend … We like the results because we see better engagements, better free trial conversions from Prime members who use the video service,” Olsavsky said. “We’re going to significantly increase our content spend, some of it is in Q2 guidance, but we’ll be expecting more of it in the backend of the year certainly.”
Online video has been a major investment area for Amazon lately. Its original TV series “Transparent” and “Mozart in the Jungle” have won Golden Globe awards recently, while the e-commerce business was the biggest spender at this year’s Sundance Film Festival.
One of the greatest upsides to the growing popularity of the streaming services is the original content they’ve been churning out for the past couple of years. While it’s not clear that’s where Amazon will be directing this spending increase, it does make sense. If both Amazon and Netflix are streaming essentially the same library of non-original content, there isn’t a compelling reason to choose one over the other. They need to differentiate themselves by hooking people with the original stuff, much like HBO and Showtime have done in the last decade or so.
As cable cord-cutting becomes more commonplace, the financial incentive begins to drive the intensity of the competition. The rate at which new shows can capture the public fancy is quicker too, as the seasons are shorter (generally thirteen episodes) and both Netflix and Amazon release the entire season at once because they understand that binge watching is what people prefer now. With the few weekly episodic series that I still watch I tend to record several weeks before I will watch any because the “wait another week” approach almost seems completely alien to me now.
This model also greatly reduces the economic barriers to entry, even for projects that have bigger names attached to them.
All of this competition does nothing but bode well for consumers who are sick of paying for what they’re not watching but usually not averse to tossing extra dollars at what they do like (I have a Showtime subscription through Amazon Prime, for instance).
Let the unbundling commence!
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