Amazon.com Inc’s (AMZN) strategy to use original video content to draw more customers to its Prime membership program appears to be paying off, with its shows drawing more than 5 million people around the globe to Prime by early 2017.
Reuters has gained access to internal company documents that reveal the impact 19 shows exclusive to Amazon had on Prime membership. Its hit drama “The Man in the High Castle” had 8 million U.S. viewers as of the early part of last year. The program cost Amazon $72 million in product and marketing expenses and resulted in 1.15 million new Prime subscribers on a worldwide basis. Amazon calculated that the show drew new Prime members at a cost of $63 per subscriber on average. (See more: Hulu, Netflix, And Amazon Instant Video Comparison.)
According to Reuters, this is the first time such details about Amazon’s video service and its impact on Prime have become public. The internal documents provide data about the cost to make a show, its viewership and the number of people that came to Prime as a result. Prime Originals, or exclusive Amazon content, accounted for around one-quarter of the total Prime signups from late in 2014 through early 2017, noted Reuters. A source speaking with Reuters says Amazon believes a specific show caused someone to start or extend a Prime subscription if that program is the first one a customer streams after signing up.
Amazon has long bet that video content would draw more users to its eCommerce platform and get them hook on its Prime membership service. Fans that want to access Amazon’s video lineup join Prime and also get the benefit of two-day free shipping and other perks. That is all aimed at driving more merchandise sales. While Amazon declined to comment to Reuters, its Chief Executive Jeff Bezos hasn’t been shy about the impact video could have on Prime. Reuters pointed to comments Bezos made at a technology conferee in 2016 when he said: “when we win a Golden Globe, it helps us sell more shoes.” Bezos said then that its TV customers renew their Prime subscriptions and convert free trials at a higher rate than Prime members who don’t stream videos. (See more: Is Amazon Prime Still The Best Deal In Tech?)
While the strategy seems to be paying off it's not without costs to Amazon. Two people familiar with the matter told Reuters Amazon spends $5 billion a year on original and licensed content and is currently one of its biggest outlays. It has fierce competition in the space, namely from Netflix (NFLX), the leading video streaming content provider.