Amazon to spend $100M on original online video content in Q3

Tools

Although the company rarely offers a look into how it allocates its resources among its various units, Amazon (NASDAQ: AMZN) CFO Tom Szkutak revealed on the retailer's earnings call that the company plans to spend $100 million in this quarter alone on original content for its Prime Instant Video service.

"We like what we see on the content side," Szkutak told analysts and investors on a conference call discussing earnings. "We've greenlighted a number of pilots (to be produced in the third quarter). So that original content (spend) will be over $100 million in Q3," he added, noting that Amazon doesn't capitalize that portion of original content that has already been produced.

Guessing what Amazon is spending on its original content offerings is something of a sport among analysts. Amazon said in 2013 it would spend about $1 billion developing several original series; split evenly between last year and this year that would mean $500 million spent on original content in 2014 alone. But Rich Greenfield, a BTIG analyst, told FierceOnlineVideo in June that the e-tailer's original content spending for this year could reach $1 billion.

Szkutak's reveal suggests that Amazon's spend is closer to the guesstimated $500 million. It may even be under that amount, which doesn't bode well if Amazon is looking for a breakout hit series to compete with Netflix's (NASDAQ: NFLX) gold-standard House of Cards--which eats up $100 million on its own each season--Orange Is The New Black and Lilyhammer.

Still, Amazon has premiered a respectable number of original series and pilots as it tries to catch up to Netflix in quantity and quality. In the second quarter, it premiered its first two kids' series, Tumble Leaf and Creative Galaxy. Five new pilots were greenlit by Amazon Studios: HysteriaReallyHand of GodThe Cosmopolitans, and Red Oaks. In March, six new series were greenlit including BoschMozart In The JungleThe AfterTransparent, and kids' series Gortimer Gibbons Life on Normal Street and Wishenpoof.

Szkutak stayed mum on any additional original content spending after the third quarter.

"We're very excited about what we see in the pilots that we had and the series we had, so we're happy to greenlight the series that we released over the past few months," he said. "You're seeing many new pilots and that's reflected in the $100 million I mentioned earlier. … what we do in terms of spend beyond Q3 I can't comment on today."

Szkutak also noted that Amazon's Prime membership is increasing despite this spring's price increase. He said that Prime members are increasingly "cross-spending," utilizing Amazon's transactional Instant Video service as well as streaming Prime content.

"If you look at the service we have today it's improved dramatically over the past 24 months," he said.

For more:
- listen to the webcast

Related articles:
A closer look at the billions of dollars Netflix, Amazon and Hulu are spending on original content
Advertising seeing one crazy summer thanks to original content growth
Original series, new content drop at Amazon, Netflix as competitors rush to catch up
Orange Is The New Black, House of Cards lead Netflix's 31 Emmy nominations
Amazon's Fire TV a success story, but lean profits have investors watching