Ama­zon.Com has found the taste and is de­ter­mined to stay the course

The Star Early Edition - - OPINION & ANALYSIS -

AMA­ZON.COM is quickly ramp­ing up the bil­lions of dollars a year it spends on cre­at­ing and li­cens­ing TV shows and films, sig­nalling the re­tailer plans to be in show busi­ness for the long haul.

The is­sue came to the fore­front of in­vestors’ at­ten­tion last week, when Ama­zon said a step up in its spend­ing on video projects could be one of sev­eral rea­sons it might re­port a loss this quar­ter, even as it ex­pects more than $39 bil­lion (R516.5bn) in over­all sales.

The com­pany’s shares, though up 33 per­cent this year, have dipped 5 per­cent since that warn­ing.

Wall Street an­a­lysts es­ti­mate Ama­zon’s spend­ing on con­tent will have tripled to more than $4.5bn by the end of this year from 2014.

Catch­ing cus­tomers’ at­ten­tion with video now rep­re­sents one of the com­pany’s big­gest in­vest­ments, peo­ple fa­mil­iar with the mat­ter said. Ama­zon does not break out spend­ing fig­ures, and it de­clined com­ment on the sub­ject.

The com­pany has vis­i­bly in­creased its foot­print in Hol­ly­wood since open­ing a nearby stu­dio in 2010, and picked up its first Academy Awards ear­lier this year.

“We ex­pect Ama­zon to quickly ex­ceed Net­flix’s an­nual spend­ing on video,” said Need­ham & Co an­a­lyst Laura Martin, who es­ti­mates that Net­flix, the top on­line tele­vi­sion ser­vice, will spend $6bn on con­tent this year.

The fast-grow­ing in­vest­ment in orig­i­nal video is just one of many si­mul­ta­ne­ous moves by Ama­zon into new ar­eas, in­clud­ing brick-and-mor­tar re­tail­ing with its planned ac­qui­si­tion of Whole Foods Mar­ket.

Ama­zon has of­fered lit­tle de­tail for in­vestors on where it is spend­ing ex­tra on con­tent, or why, making it hard to eval­u­ate if the in­vest­ment is work­ing.

Broadly, it has said video is a key ben­e­fit of its money-spin­ning Prime shop­ping club, whose mem­bers tend to buy more goods from Ama­zon on top of pay­ing a yearly fee.

“When we win a Golden Globe, it helps us sell more shoes,” chief ex­ec­u­tive Jeff Be­zos said at a Re­code tech con­fer­ence last year. “Peo­ple who use Prime Video… re­new at higher rates, and they con­vert from free tri­als at higher rates.” – Reuters

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