Tencent Technology News, according to foreign media reports, according to a number of documents released by Amazon show that as of early 2017, the company's top TV programs have attracted more than 5 million people worldwide to join their Prime Club. The statistics disclosed by Amazon for the first time indicate that the company’s gambling on original content began to pay off.
The documents also show that the total number of U.S. members viewing all video programs on Prime, including movies and television programs licensed from other companies, is approximately 26 million. Amazon has never announced the total number of viewers for Prime Video services.
These internal documents also compare the results of the comparison of the indicators of Amazon's 19 exclusive original dramas, including their production costs, ratings, and the number of members they helped attract. Amazon has never disclosed such data before. Amazon called this kind of program "Prime Originals" (Prime Originals). Analysts estimate that the number of new members attracted to these original programs will account for about one-fourth of the total number of new Prime members between the end of 2014 and early 2017. .
At the heart of the Amazon strategy is the use of video to transform viewers into shoppers. Fans who pay for a certain annual fee to purchase Prime members can enjoy a range of services and benefits, including two-day delivery of express delivery services and other benefits.
Amazon declined to comment on these internal documents. However, Jeff Bezos, the company's chief executive, once admitted that the company will use entertainment content to promote sales. The world's largest online retailer launched Amazon Studios in 2010, developed its own original program and won many awards and praise from Hollywood.
Bezos said at a technology conference near Los Angeles in 2016: “When we won the Golden Globe, it helped us sell more shoes. “ He said that movie and TV viewers have a higher rate of renewal of Prime membership, and that consumers who watch movies and TV shows are more willing to purchase Prime during the free trial of Prime membership services than those who do not watch these video content. member. ”
According to two people familiar with the matter, video has become one of Amazon’s biggest spending programs, and the company spends US$5 billion annually on making original content and purchasing authorized content. The company has never previously disclosed how many Prime members these original content brings to it, so it is difficult for investors to evaluate its decision making on content production.
These internal documents show Amazon’s financial considerations for its strategy, and why the company is now producing more commercial programs, in addition to programs designed to win big prizes.
For example, the first season of the hit show "The Man in the High Castle" is an alternative historical drama depicting Germany as a Victory State in World War II. By early 2017, the show had 8 million spectators in the United States. The document shows that the production and marketing cost of this hit series was US$72 million and attracted 1.15 million Prime new members for Amazon on a global scale.
As a result of Amazon's calculations, the average cost of attracting Prime new members for this drama is US$63 per member.
This is far lower than the $99 annual fee paid by Prime members of the United States; the company's Prime membership fees charged outside the United States are similar. Bezos said that Prime members purchase more products from Amazon than non-members, which further increases profits.
Amazon's secret mathematics
These internal documents do not clearly explain how Amazon determines the motivation for customers to join their Prime Club.
However, according to a person familiar with the matter, the company believes that if an original drama is the first episode watched by a customer after registering for a Prime membership service, the company determines that the episode attracts the customer’s first purchase or renewal. Purchase Prime member services. These documents mentioned this indicator several times and called it "first stream".
Then, the company used the production and marketing cost of the episode divided by the number of first stream of the episode to arrive at the average cost of the new Prime members attracted to the episode. The lower the number, the better.
These internal documents did not show how long members stayed on the Prime service, nor how many products they purchased on Amazon. The company also evaluated other indicators of its original program. Therefore, these documents do not provide enough information to determine the overall profitability of Amazon's original content business.
Despite this, the data still shows that most people enjoy video programs can indeed attract a large number of Prime new members at a relatively low cost. The best performer was a car-themed television show “The Grand Tour” hosted by the former host of BBC’s “Top Gear” program. The first quarter of the show attracted 1.5 million new members from all over the world, with an average cost of $49 per member.
The internal document statistics mainly include the number of Prime members in the United States, the United Kingdom, Germany, Austria, and Japan. Before launching Prime Video globally in December 2016, Amazon’s video services have already been launched in these countries.
Analysts estimate that there are 75 million or more Prime members worldwide, including about half of the United States.
As of early 2017, about 26 million American Prime members watched TV and movies on Amazon. Reuters calculated this data using the data provided by these internal documents, which shows the proportion of the audience that a TV drama has in the total number of Prime Video viewers.
In the first quarter of last year, Prime Video’s competitor Netflix’s number of members in the United States was roughly double that figure. It did not disclose how many of its members are active audiences.
For years, the goal of Amazon Studios was to use high-quality programs to win big awards and reputation in Hollywood. Its black comedy "Transparent" won the 8 Golden Times Emmys and created a sensational effect for Amazon to recruit top producers and actors.
However, the ratings of "Transparent Family" have not caught up with its top shows. According to these documents, the number of U.S. audiences attracted in the first quarter of the show was only half that of the U.S. audience attracted by the "High Castle Odyssey," and by the third quarter, the number of viewers dropped to 1.3 million.
Similarly, "Good Girls Revolt" has a population of 1.6 million people in the US, but its production and marketing costs are US$81 million, and it attracts only 52,000 Prime new members globally.
According to the document, the cost for each member of the show was approximately $1,560. After the broadcast of the first quarter, Amazon cancelled the show.
According to informed sources, Amazon is currently working on making more commercials and derivative content to attract viewers outside the United States. Outside the United States, prime member services have much more room to grow.
Amazon has long been committed to expanding its content, and this part of the business will be headed by Jennifer Salke, president of NBC Entertainment. Amazon just appointed her as director of the studio last month. According to informed sources, Bezos hopes to create an episode that can compete with HBO's hit drama "Game of Thrones."
In November last year, Amazon announced that it will create a prequel to the fantasy hit "The Lord of the Rings." According to people familiar with the matter, the company spent only $250 million to buy the right to make the show, and production and marketing costs for the production of the two seasons may reach $500 million.
The document shows that the production and marketing costs of the "Lord of the Rings" prequel are as high as $500 million, which may be three times the sum of the costs of the first quarter and second quarter of "High Castle". This means that it needs to attract three times the number of new Prime members attracted by the "High Castle" to get the same return.