The move to original content continues for video streaming services as Amazon's (Nasdaq:AMZN) Prime Instant Video announced December 20 that it's producing pilots for six comedies. Prime viewers will then be asked which of the six they like the best; those will be green lighted for the production of full seasons. Conceptually, it seems like a great idea. Unfortunately, you know what happens to the best laid plans of mice and men. This could be a colossal flop or the beginning of a trend in television viewing. Good idea? Bad idea? I'll toss it around.

Guide To Oil And Gas Plays: We've got your comprehensive guide to oil and gas shales in North America.

Every September it seems the new shows debuting on the networks go away faster than they came. The combined success rate of new shows (picked up for a second season) in 2011 for ABC, CBS, CW, Fox and NBC was a dismal 42%. The best of the bunch - NBC - could deliver no better than a 50% success rate. That's worse than the success rate of top money managers and they arguably have a far more difficult task. No, it's clear that television audiences are a fickle bunch getting more so every year. Therefore, Amazon's new approach to television production provides it with the ultimate focus group ideally avoiding the pratfalls that come with an inexact science. Not only do the Amazon Prime subscribers get a chance to determine what they ultimately view, but they also get the VIP treatment, as if they're network programming executives. That's probably an even bigger attraction than getting to pick what you watch. Who doesn't like feeling special? This has home run written all over it.

SEE: Netflix Has A Bumpy, Crowded Road Ahead.

It's that fickleness thing I mentioned previously. You pull together six teams of writers, directors, actors, camera people and all the other professionals required to film a pilot; then you send all of them on their way while you survey your audience. Once the verdicts are in, you then have to bring the teams back to get the show(s) made. With a traditional show, writers pitch the networks in early summer; first drafts are completed in the fall with revisions by Christmas. If all goes well, the network gives the thumbs up in January, a pilot is made by May and given the green light for more episodes in time for a fall premiere. The Amazon process and timeline won't be marginally different from the traditional development with the exception of the time necessary to canvas Prime's viewership. Unlike focus groups carried out in the traditional process, viewers will expect their opinions to be listened to. What happens if the viewers want something that is awful in the eyes of TV executives? Do they have to follow through with production? These are some of the questions investors must consider when pondering Amazon stock as a result of this innovative, yet risk-filled approach to show development.

We know what Amazon's doing, but what about the rest of the video streamers.

Netflix (Nasdaq:NFLX) delivered its first exclusive series in January 2012 called "Lillyhammer," a show that I enjoyed because of my Scandinavian heritage, but which got mixed reviews. Apparently, a second season is set to run in the New Year. It's also resurrecting "Arrested Development" as well as producing "House of Cards," an original series starring the talented Kevin Spacey. Netflix paid $100 million for two seasons (26 episodes) of the show without seeing a pilot. What's most interesting about the show is they're releasing the entire first season on February 1. Netflix subscribers can watch at their own pace, instead of once a week like TV. That's the way TV should be. Hulu, which mixes paid subscriptions with advertising, invested $500 million in original content and fees for ongoing programming in 2012; it had a great year financially with revenues of $695 million and a 50% increase in subscribers to three million. In terms of original and exclusive content, it launched a total of 25 series. It's not quite Netflix but it's doing well with its own version of video streaming. As for the Verizon (NYSE:VZ) - Coinstar (Nasdaq:CSTR) partnership, it's yet to launch and when it does in the first quarter of 2013, it will be devoid of original content choosing to focus on a smaller selection of movies subscribers will want to watch. It's pushing quality over quantity. I'm not sure that makes sense but we'll know soon enough.

SEE: What's Next For Netflix?

The Bottom Line
I see Netflix's model as the one to beat. Its Disney (NYSE:DIS) deal announced in early December gives it some of the most popular content coming out of any studio while building original content that viewers will want to watch. Its combination of new and old programming means subscribers get a little bit of everything, and it keeps the price reasonable while not becoming stale. Amazon's move to allow viewers to choose appears to be nothing but a gimmick. Some people might like it but the majority will only care if the shows are worth watching. It's not a game changer by any means.

At the time of writing, Will Ashworth did not own any shares in any company mentioned in this article.

Related Articles
  1. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  2. Investing

    The Rise of Corporate Venture Capital

    After the success of Google Ventures, corporate venture capital is an increasingly popular diversification and hedging tool for many large corporations.
  3. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  4. Investing

    What’s Plaguing Twitter and Yelp?

    Yelp and Twitter have recently become grounded in reality and unable to justify their sky-high stock valuations.
  5. Investing

    Three Companies That Will Benefit From Online Gaming

    Certain companies stand to benefit from the increasing popularity of the online gambling industry in the U.S., as well as its expanding legalization.
  6. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  7. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  8. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  10. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  5. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  6. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!