Amazon Prime Video plots Hollywood expansion

[August 07, 2024]  By Dawn Chmielewski and Greg Bensinger

(Reuters) - When Mike Hopkins was approached about leading Amazon Prime Video, his view of the streaming service matched one held widely in Hollywood -- it was nothing more than a perk for subscribers of the online retailer’s two-day delivery service.

But Amazon founder Jeff Bezos had much bigger ambitions for the service that offers movies, television shows and original programming.

“After meeting with Jeff, it was very clear that he really saw this as an opportunity to build a media company,” said Hopkins, an entertainment industry veteran of Fox Networks, Sony Pictures and Hulu who has in the last four years plotted Prime Video’s path to mainstream Hollywood player.

Under Hopkins, Prime Video is being recast in the mold of a traditional media company, with its own film studio and theatrical distribution arm, a growing slate of original movies and series featuring A-list actors, an expanding roster of professional sports and advertising.

"We ... like the progress of Prime Video," Amazon CEO Andy Jassy told investors this month.

Prime Video’s gathering star power-- and live sports -- position it to capture a greater share of the $28.75 billion in digital advertising revenue Emarketer projects will be spent this year on streaming, as marketers trim their investment in traditional television. Morgan Stanley estimates Prime Video ads could generate $3.3 billion in sales this year and more than double to $7.1 billion within two years.

Even so, Prime Video continued to lag industry leaders YouTube and Netflix by share of streaming television viewing in the U.S. for the month of June, as measured by Nielsen. And, while more of its shows have broken into Nielsen’s Top 10 ranking of the most-streamed original series in 2023, Netflix remains dominant.

SPORTS, STARS AND ADS

Still, Amazon’s aspirations to create a single entertainment destination that offers something for every taste are coming into clearer focus, say nine agents, ad buyers and entertainment industry executives.

Prime Video became the first streaming service to land an exclusive deal with the NBA, creating year-round sports programming that, by 2025, will include the NFL football, NASCAR car racing, the WNBA Finals and Champions League soccer.

And in a threat to traditional studios, Amazon plans to more than double the number of theatrical releases from six this year to as many as 16 by 2027, Reuters can report for the first time. That number does not include movies made for non-U.S. audiences, the five or six it typically acquires from other studios, and the dozen or so movies it plans to distribute directly on Prime Video. That output would rival that of Hollywood's most prolific studio, Universal Pictures.

Prime Video increased its outlay by $1.7 billion to $13.6 billion this year as it deepens its investment in professional sports and increases the volume of content production, market researcher Ampere Analysis estimates, while other studios tighten spending on content.

Amazon’s talent roster increasingly features Hollywood’s A-list, like Reese Witherspoon, Jake Gyllenhaal and Octavia Spencer, alongside sports standouts such as tennis great Roger Federer. It even struck a deal with Netflix’s former film chief, Scott Stuber, to revive the storied United Artists label at Amazon MGM Studios.

Prime Video now understands “they need premium content and celebrities in order to attract advertisers,” said Jessica Brown, managing director of digital investment for media buyer GroupM. “Before, they had the reach and scale, but they didn’t have the content story."

"You need to be culturally relevant,” she said.

Madison Avenue took notice when Prime Video this January began showing ads to its roughly 115 million U.S. viewers, instantly becoming the largest ad-supported subscription streaming service, domestically, according to Emarketer.

Advertising executives said that reach and the purchasing insights gleaned from Amazon’s online retail store offer a distinct opportunity. Notably, Amazon can offer to instantly sell consumers goods they see during commercial breaks.

“That is reverberating through the marketplace right now,” said Kevin Krim, CEO of marketing analytics firm EDO, adding that the flood of new inventory may also be driving down advertising prices for others.

A woman walks past a hoarding of Amazon Prime Video during an Amazon Prime Video India launch event in Mumbai, India, April 28, 2022. REUTERS/Francis Mascarenhas/File Photo

ENTERTAIN EVERYONE

Amazon has at times struggled creatively. Despite hits like “The Boys” – about vigilantes who seek to expose corrupt superheroes, which hit No. 1 in more than 165 countries when the fourth season debuted – it also produced expensive misses like “Citadel,” a thriller with tepid reviews that failed to make Nielsen’s streaming rankings in the U.S.

A creative team is courting more broadly-appealing fare with global reach, said Hopkins. The ideal Prime Video project has been described by talent agents as the equivalent of an airport novel, a story that’s page-turning and commercial. It’s Amazon’s answer to Netflix’s programming philosophy of offering a “gourmet cheeseburger,” or well-executed entertainment that’s also widely popular.

“We want to be lots of people’s No.1 show or film,” said Hopkins, head of Prime Video and Amazon MGM Studios.

Amazon is focused on four different audience segments -- including men and women over age 35, and those under 35 -- that it can serve with a reliable stream of content that's budgeted in a way that reflects the size of the potential audience, said Hopkins. Projects with broad appeal would have larger budgets than those targeted at a narrow demographic, he said.

Agents say Amazon is on the hunt for young adult fare like "The Summer I Turned Pretty," a teen romance, action-thriller series in the vein of "Tom Clancy’s Jack Ryan," which appeal men over age 35, and female-skewing stories like "The Idea of You," about a love affair between a single mother and the lead singer of a boy band, which attracted nearly 50 million viewers worldwide in its first two weeks.

"We don't want to have a 'Saltburn' and then nothing else for that audience for six months," Hopkins said in an interview, referring to the popular Amazon MGM psychological thriller about an Oxford student’s entanglement with a classmate’s eccentric family.

Amazon continues to place calculated big bets. The $150 million it spent to adapt video game “Fallout” as a critically acclaimed series became Prime Video’s second most watched series.

Instantly recognizable characters and stories are critical, because Amazon tends to attract viewers seeking specific shows, according to one agent who requested anonymity to preserve his relationship with the company. "People aren’t just trolling around on Amazon like they do on Netflix," he said.

It’s a far cry from Amazon’s early foray into video streaming, when it attempted to crowdsource content from customers.

The transition accelerated with Amazon’s $8.5 billion acquisition of MGM, the studio behind the James Bond and "Legally Blonde" franchises. That deal gave Amazon a trove of intellectual property which it could mine, without engaging in costly bidding wars for sought-after projects, said Hopkins.

He said Amazon wanted to avoid an "arms race."

"We decided it would be better for us, in the long run, to own a studio that had really good IP, and then develop our own things," said Hopkins.

Sports are another critical pillar of Hopkins's media strategy.

The final element of Hopkins’ plan is to recreate "Prime without the shipping." Amazon has amassed a deep library of content, spanning free, ad-supported TV-like channels, rival streaming services like Paramount+, recently released movies to rent or buy, all accessible via Prime Video's newly redesigned app.

"What we're really trying to build is not just a single subscription service -- I think we've proven that we can play a much broader game," said Hopkins, adding that as CEO Jassy has said, "We're on track to be a meaningfully profitable business in our own right.”

(Reporting by Dawn Chmielewski in Los Angeles and Greg Bensinger in San Francisco; Editing by Anna Driver)

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