During the third quarter, Amazon.com, Inc. plans on investing more than $100 million into the production of original video content for Amazon Prime subscribers, according to their chief financial officer, Tom Szkutak.
Spending such a significant amount of money to create original programming may be necessary to create top-quality programming.
“It doesn’t come cheap when you want to get into the business of Hollywood,” Bloomberg’s Jon Erlichman said, reporting in a video for Bloomberg TV.
Roy Price, the director of Amazon Studios, spoke to Erlichman about the budgets for original shows. He explained that these shows are as expensive to create as for streaming services as they are for regular television, noting that top actors are often unwilling to take a pay cut.
Investing in content has worked out well for Amazon’s competitor, Netflix, whose original shows have been nominated for 21 Emmys this year. Netflix has recently reached about 50 million subscribers for its video streaming service.
However, even after Amazon’s planned spending increase, their spending on video content production still may not be a match for Netflix’s investment. House of Cards, one of Netflix’s most popular original shows, cost $100 million to make on its own, according to CNET.
The online retailer announced the spending increase for original content during the same day they released information about losing $126 million during the second quarter. But Amazon is trying to stay competitive, especially after having its stock drop about 10% during after-hours trading after the Q2 loss was announced.
Amazon Prime membership has already increased from the second quarter of 2013 to the second quarter of 2014. Customers who join Amazon Prime in order to stream free videos often end up purchasing other digital products as well, Szkutak said during a call with analysts.
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