Monday, March 19, 2018

When Does a Show Turn a Profit?

Slate recently reported that Amazon Prime's streaming numbers do not look so good ("Amazon Prime’s Streaming Numbers Are Out, and They’re Surprisingly Underwhelming"). But, as they point out, this is not so easy to figure out. One of the goals, perhaps the primary goal, of Amazon's foray into producing TV shows is "customer acquisition" for Amazon Prime's online shopping offerings.
A source informed Reuters that Amazon evaluates shows based on the number of times that show was the first thing viewed by a Prime subscriber after signing up. “The company then calculates how expensive the viewer was to acquire by dividing the show’s costs by the number of first streams it had,” the report explains. “The lower that figure, the better.” Unfortunately, a number of beloved Amazon shows sport high costs per first stream.

This is just one metric because shows now can generate ad revenue too ("Amazon Prime Video free with ads? Not quite"). But it highlights what is most important to Amazon. And it seems to be driving production decisions.
While The Man in the High Castle, for instance, had one of the lowest costs per first stream after its first season, $63, that number jumped up to a whopping $829 following the production of Season Two. Mozart in the Jungle season two, despite having one of the studio’s lowest budgets at $37 million, cost $581 per first stream. Feminist cult favorite Good Girls Revolt was singled out as the highest cost per stream: $1,560 against its $81 million season one budget. The show got the axe after one season and just 1.6 million viewers.

Another inference is that Amazon considers the online shopping to have higher margins. It was willing to set low margins for TV streaming so as to shift out the demand for the complementary product, online shopping. Not too different from bars offering free peanuts to patrons in order to sell more beer.