Similar to Netflix and Hulu, Amazon creates a number of original programming for its Prime Video streaming service – one of the many perks that come with an Amazon Prime subscription. Amazon spends billions of dollars on this video content each year, and thanks to a new report, we now have a better idea as to how these original shows make Amazon money.
According to internal documents that were discovered by Reuters, 26 million people watched some sort of programming on Prime Video in 2017. However, of that 26 million, original content for the service helped draw in 5 million new subscribers for Amazon Prime.
To determine how its original programming is making the company money, Amazon reportedly uses a system it calls "cost per first stream." Amazon takes the total production/marketing cost of one of its shows, divides that by the number of people that viewed it as their first ever stream on Prime Video, and uses that number to figure out how much it cost to get a new Prime subscriber.
The Grand Tour secured Amazon 1.5 million new Prime subscribers for $49 each.
For example, a highly-popular show like The Grand Tour attracted 1.5 million of these "first streams." When the cost of producing and marketing The Grand Tour is divided by the first streams, Amazon determines that the show helped it get 1.5 million new Prime subscribers for just $49 each. Considering that a yearly Prime membership costs $99 in the U.S., that's a big win.
Another successful show for Amazon, The Man in the High Castle, cost $72 million to create while attracting 1.15 million first streams, resulting in a new Prime subscriber cost of $63 each.
Unfortunately, these big bets on original programming can also take a turn for the worse. Amazon released season one of Good Girls Revolt in 2015, and while it attracted a total of 1.6 million viewers, only 52,000 of those were first streams. In other words, that show cost Amazon $1560 for each new Prime subscriber it attracted.
Amazon's currently spending around $5 billion each year for both original and licensed content, and this makes it one of the company's largest expenditures. Going into 2018 and beyond with a Lord of the Rings prequel expected to cost the company more than $500 million on its own for two seasons, these costs don't appear to be decreasing any time soon.
If you're an Amazon Prime subscriber, have you watched any of Prime Video's original movies or TV shows?
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