Amazon's content push faces bumps in the road (AMZN)

BI Intelligence

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Amazon Studios, the film- and TV-production unit of Amazon, is facing a number of issues that may be limiting the unit’s growth, according to The Wall Street Journal.

The reasons include poor relations with certain content creators, a reportedly frustrating creative process, and an uncertain content strategy.

The news comes despite the company’s ability to churn out high-profile releases like Manchester by the Sea, which won two Oscars, and The Big Sick, which performed particularly well at the box office this past summer.

Here are some key takeaways that further explain Amazon Studios’ troubles:

• The company’s hit TV shows still draw relatively small audiences when compared to other streaming services’ hits. Transparent, which won Emmy awards in 2015 and 2016, drew audiences of less than 1 million in its recent seasons, according to an Amazon Studios employee. By comparison, Netflix’s hit show Stranger Things averaged over 14 million viewers within its first 35 days being released. 
• Low TV viewership numbers come despite Amazon’s large content budget.Amazon is set to spend around $4.5 billion on Prime Video programming in 2017, per JPMorgan estimates. This is higher than Apple, HBO, and Hulu, which plan to spend $1 billion over the next year, $2 billion in 2017, and $2.5 billion in 2017 on original content, respectively. Amazon’s planned spend is lower than Netflix’s planned $7 billion budget over the next year, but it nonetheless has the capacity to spend more — Amazon had over $13 billion in cash as of June 2017.
• Some creators reportedly describe Amazon’s creative process as chaotic. Shawn Ryan, who produced Amazon’s “Mad Dogs,” described his experience with the company as confusing and frustrating — Amazon would frequently take more than a week to send creators notes after a cut of an episode was submitted, while it is standard practice in Hollywood to receive such notes within one day. Additionally, David E. Kelley, who created Amazon’s show Goliath, left after one season due to conflicts over creative direction, and his successor left for similar reasons. 

Additionally, a narrow content strategy has contributed to troubles at Amazon Studios.For example, the company has focused too much on creating indie hits in the past, admitted Amazon Studios chief Roy Price. Additionally, Price encouraged the purchase of a series that reportedly mirrored his personal life, which Amazon declined to buy after a conflict-of-interest legal review. Amazon plans to pivot its content strategy to be more globally appealing, shying away from children’s programming, which could help put the division back on track.

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