How Amazon's decision to spend billions on video is paying off (AMZN)

pulse

April 30, 2018 9:47 PM

Amazon uses Prime Video to increase premium membership subscriptions. Here's how much it costs Amazon to win subscriptions using in-house productions.

For $99 a year, Amazon Prime subscribers get exclusive access to all of its original video content and two-day shipping. The goal is to draw Amazon Prime subscribers in with content and then use the perks to turn those subscribers into consistent shoppers. "When we win a Golden Globe, it helps us sell more shoes," Bezos said at a 2016 technology conference.

In order to determine the entire cost of each in-house production to the company, Amazon considers the total amount spent on marketing and production for a show, and compares it to the number of new Prime subscribers who opted to watch that show first, according to internal company documents revealed by Reuters. The assumption is that these subscribers signed up for Amazon Prime primarily to access that show.

As this chart from Statista shows, the result is a breakdown of the cost per first stream. Even though Amazon spent almost the same amount on production and marketing on the first seasons of "Grand Tour" and "Good Girls Revolt," the graph shows that the difference in cost per subscriber is vastly different.

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