I was quoted in two articles last week, both paywalled:
* “Why Netflix’s New Ad-Supported Tier Could Lead to More Ratings Transparency” by The Wrap’s Brandon Katz
* “With Rings of Power, Amazon Bets a Billion on One Show to Rule Them All” by Bloomberg Businessweek’s Felix Gillette
There is a counterpoint to my essay from two weeks ago that “Amazon’s ‘Lord of the Rings: The Rings of Power’ series is shaping up to be a seismic event in streaming”. Quite simply, Amazon's ecosystem isn't built to deliver a global hit with “The Rings of Power”.
That was the premise of a Business Insider article reporting that Amazon insiders believe the series will make or break the futures of Amazon Studios and Amazon Prime Video ($ - paywalled):
"The reason why it's going to succeed is because the executives at Amazon need it to succeed. If it doesn't succeed, there's going to be a big question from Andy Jassy and the board," said one former senior Amazon Studios exec. "If we can't take this piece of IP and make it successful, why is Amazon Studios even here?"
"It has to succeed," this person added. "There's no option."
In my essay I argued that success would be driven by how Amazon’s entire ecosystem is structured so as to be able to put “The Rings of Power” one click away from anyone who may be browsing Amazon.com, watching a Twitch livestream, or logging into their Fire TV.
But what if it isn’t? This anonymous executive is implying that all those conversion funnels and proprietary bells and whistles to drive clicks within Amazon’s global ecosystem may not matter because Amazon cannot connect the dots across all its competitive advantages.
That, alone, would be significant. But the deeper implication would be that neither a global commerce titan nor the free market can connect the dots to produce a global hit in streaming.
Bloomberg’s Felix Gillette reported that Amazon is already “mobilizing its unique armada of media and hardware assets”: “Amazon Books, Amazon Music, Amazon’s livestreaming site Twitch, Amazon’s entertainment site IMDB.com, and Amazon’s Fire TV have contributed to the effort by pushing synergistic Tolkien-related promotions, including deals on the original books and images from the show plastered on grocery bags.”
The obvious takeaway is that these are extraordinary advantages, and Amazon is going to be leveraging them to their fullest potential. With $1B invested in The Rings of Power, and $250MM doled out for the rights to five seasons and a spinoff, they will need to.
But how *will* the dots connect in a way that delivers a global hit for Amazon?
Answer #1: Amazon Prime
For Amazon, CEO Andy Jassy recently wrote to shareholders, The Rings of Power is one of a number of “unique benefits” to “make Prime even better for members”. In other words, the measure of success for The Rings of Power will be in sales of Prime memberships and retail sales. Moreover, it will also be using the data it gathers from sign-ups to power its $31B Amazon Advertising business.
Another measure may be Amazon Studio's internal metrics, as Reuters reported in 2018, that evaluate the cost of a series, viewership, and Prime membership growth to determine a key measurement: cost per first stream. The lower that cost, the more efficient — and valuable — the show. Insider quotes an anonymous former executive describing that cost for The Rings of Power as “astronomical”.
So, the cheapest source of first streams of The Rings of Power will come from within the Amazon ecosystem, like Twitch and IMDb.com. The most expensive will be outside the Amazon ecosystem, as Amazon will be paying external sources of traffic to acquire Amazon Prime subscribers and/or to people to sign up for Prime Video to watch The Rings of Power. But Amazon is so consistently opaque with its Prime data that it is guesswork as to whether these economics can drive audiences at scale for a global hit.
Answer #2: The Amazon Ecosystem
Another need for The Rings of Power to up its odds for becoming a hit is forAmazon’s ecosystem to effectively and efficiently personalize marketing just as well as the Netflix app’s home page, which is able to algorithmically target shows based on 220MM+ user preferences, 20 years of user data and a show’s growing popularity.
That means, without a singular destination like Netflix’s home page, Amazon will need to rely on its in-house targeting abilities to drive click-through across Amazon.com, Amazon Books, Amazon Music, Twitch, IMDB.com, and Amazon’s Fire TV are each very different channels.
There are 200MM Prime subscribers and 300MM active customer accounts globally. Amazon Music had 55MM members as of December 2020. Twitch, which has 31MM average daily visitors (as of December 2021), but Amazon has 120 million monthly active users across Twitch, free ad-supported service FreeVee and its other ad-supported properties.
Amazon also sells its proprietary Fire TV devices, of which it has sold 150MM worldwide. All those target subscribers are fragmented across those destinations.
They are further fragmented internationally, as Amazon delivers to over 100 countries. Amazon Prime Video is in more than 180 countries worldwide, excluding Mainland China, Iran, North Korea, and Syria.
Considering in light of Netflix’s singular home page - which both customizes itself to each user and makes a hit show like "Squid Game" easily findable and consumable - it becomes clear that the dots don’t easily or necessarily connect easily between an Amazon ecosystem visitor becoming a viewer of The Rings of Power. Meaning, the scale is extraordinary (though 150MM devices sold to date - as a metric - includes devices that are no longer in use), but the primary objective of the Amazon ecosystem is to drive e-commerce sales, and not Prime Video views.
Has Amazon ever attempted to drive this many different users across this many different channels with such an ambitious outcome before? No.
So when CEO Andy Jassy defines success in terms of Prime Member benefits, he may be simply managing expectations. One $1B+ dollar investment for one division - about which Amazon remains opaque in sharing data - won’t change that.
Are ads the X-factor?
So the dots may not connect, and the Amazon ecosystem may not drive optimal results for Amazon Prime Video, despite optics and metrics that suggest otherwise.
Are there any solutions? Based on the recent success of Amazon’s Advertising division - $31B in revenues in 2021 - maybe the secret sauce that connects the dots is advertising. It’s growing rapidly (18% year-over-year last quarter) and is sophisticated enough to deliver targeted in-house ads.
But, like e-commerce, Amazon Advertising wasn’t built for CEO Jeff Bezos' Hollywood ambitions with Amazon Studios. Even FreeVee has gone through two previous rebrandings (IMDb Freedive, IMDb TV). It may not have the type of scale yet to deliver the types of learnings that could drive a competitive, personalized and algorithmically targeted marketing of The Rings of Power.
So, if the dots don’t connect for The Rings of Power globally, it will be largely because the core DNA of Amazon isn’t to serve video views (unlike Netflix).
What can we expect, instead? A former Amazon Studios insider gave Business Insider a good answer: "If it's not the highest-performing thing Amazon has ever done, it's a failure. But the outside world may not ever know."
Must-Read Monday AM Articles
* All viewers of Amazon’s Thursday Night Football broadcast will be able to join a live broadcast, pause, and rewind up to 15 minutes from the point that they turned the game on.
The Vibe Shift
* NBC is considering reducing the number of hours it programs in prime time, a cost-cutting move that would reflect broadcast television’s diminishing popularity ($ - paywalled)
* Hollywood production in U.K. soars to record levels as crews complain of burnout
* The Trade Desk has put together a six-person team to help advertisers buy ads in console games, mobile apps, and PC games ($ - paywalled)
The 200 vs. The 10 Million
* A leaked presentation shows how Disney is going up against Netflix, HBO Max, and others for streaming ad dollars ($ - paywalled)
* Netflix kids programming and new movies will stay commercial free when the company introduces its advertising-supported service
Aggregator 2.0 & Bundles
* Why MultiVersus Characters are Amazing (a must-watch ~ 15 minute video if you want to understand why WB and DC fans like it so much)
* While video game IPs are seemingly hotter than ever, literary tie-ins — which had become so common over the past 20 years — face a more uncertain future
* YouTube has officially launched a dedicated Explore page for podcasts, which puts its podcast ambitions alongside other longtime major mainstays like the Trending tab, the YouTube Gaming hub, and YouTube Music.
Sports & Streaming
* “Being a fan is now more annoying and expensive than ever”, writes Alex Kirshner on sports streaming for The Atlantic
* Amazon is revamping its 'Thursday Night Football' broadcasts to do for the NFL what Netflix's 'Drive to Survive' has for F1
* Peloton has struck a partnership with Amazon in a bid to broaden its customer base and win back investors’ confidence.
* TikTok influencer Jake Paul gave an interview to New York Magazine’s Intelligencer about his new sports betting platform
* Euro football stars Lionel Messi and Vinícius Júnior are backing a mobile app called Momento Market, where fans can compete for their favourite players’ shirts during certain elite European matches.
* The launch of FanDuel TV represents the first foray by one of the industry’s major legalized sportsbook operators into the media business.
Creator Economy, Platforms & Transparency
* Cameo for Business “takes all the finesse of the original [Cameo] product and trains it toward promoting stalwart brands like Nissan, Bud Light, and Dean’s Dairy Dip.”
* Youtube is getting ready to support YouTube Shorts, its take on TikTok videos, within its smart TV app.
Original Content & “Genre Wars”
* Warner Music Group executives shared with The Hollywood Reporter the negotiations that went into using Kate Bush’s "Running Up That Hill" in Season 4 of Netflix’s “Stranger Things”
* Roku wants to attract more viewers and advertisers to its channel, and a coming biopic of “Weird Al” Yankovic is its most ambitious project to date ($ - paywalled).
AVOD & Connected TV Marketplace
* Amazon, Roku, and Apple made a mess of streaming with their subscription stores, and more are on the way.
Other
* Kelly Campbell, president of Peacock for less than a year, gave an in-depth interview to Deadline’s Dade Hayes.
* Driven by low production costs, a cash rebate arms race and the limited capacity of Central European hotspots Hungary and Czech Republic, Southeastern Europe is enjoying an unprecedented production boom.
* “I made a map of Spotify podcast recommendations. Here's what I learned.”
* Niche internet micro celebrities - “nimcels” - are taking over the internet