Amazon Praises Video As Key Driver Of Prime; 2022 Content Spend, Including Music, Hit $16.6 Billion

UPDATED with content spend stats from annual report: Giant Amazon said its total expenses for video and music came to $16.6 billion last year, up from $13 billion in 2021.

Video and music expense includes licensing and production costs associated with content offered within Amazon Prime memberships, and costs associated with digital subscriptions and sold or rented content, according to the company’s latest annual report that followed fourth quarter financials yesterday.

On an earnings call Thursday, CFO Brian Olsavsky noted that Amazon spent $7 billion on originals, live sports and licensed content in 2022, up from $5 billion the year before. It’s unclear if those figures include all worldwide video content, which is increasingly central to Amazon’s strategy in driving membership for Prime, the biggest loyalty program in the world and the beating heart of the company.

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Amazon (which acquired MGM last year for $8.5 billion in cash) carefully evaluates its return on spending across its businesses and, said Olsavsky, “We continue to be encouraged by what we see, as video has proven to be a strong driver of Prime member engagement, and new prime member acquisition.” The Lord Of The Rings: The Rings of Power which ended its first season in the fourth quarter, drove more Prime sign-ups worldwide during its launch window than any previous Prime Video content.

Content is still a small component in the giant company’s total cost of sales, which last year stood at $289 billion.

CEO Andy Jassy also weighed in. He took the reins from Jeff Bezos in May of 2021 on the heels of a Covid boom in business for the company. That sequed to disruption from the Russia-Ukraine War, skyrocketing inflation, high interest rates and an uncertain economy all taking hold on his watch. Growth at its core e-commerce and Amazon Web Services slowed last quarter. Asked about priorities in the current climate, he listed a few things the company is leaning into — including entertainment.

“We are very enthusiastic about our investment in streaming entertainment, devices, satellite (Project Kuiper), health care, and a few other things,” he said. “Do I think every one of our new investments will be successful? History woudl say that would be a long shot. But it only takes one or two.”

PREVIOUSLY: Amazon said today its revenue rose 9% to $149 billion for the fourth quarter, beating forecasts, on a big drop in net income that made the three months ended in Dec. the e-commerce giant’s least profitable holiday quarter ever.

Online sales and web services were both fell short of expectations as consumers and businesses alike cut back on spending in a high-inflation, high-interest rate world. The company, which expanded dramatically during Covid when online shopping exploded, is still dealing with a post-pandemic hangover as more people return to brick-and-mortar stores.

Entertainment, still a small part of the pie and not broken out, got quite some ink in the earnings report, especially The Lord Of The Rings: The Rings Of Power to Thursday Night Football.

North America segment sales increased 13% year-over-year to $93 billion. International segment sales decreased 8% year-over-year to $34.5 billion, or increased 5% excluding changes in foreign exchange rates.

Net income plunged to barely $300 million in the fourth quarter, or 3 cents a share, from $14.3 billion, or $1.39. The company lost money for the full year, with $2.7 in red ink, for the first time since 2014. That was due in large part to its investment in electric automaker Rivian. Some $2.7 billion of Q4 charges included $640 million in severance costs. Massive layoffs at Amazon mirror the rest of the tech sector.

Key web services division AWS saw segment sales rise 20% year-over-year to $21.4 billion.

Advertising revenue of $11.56 billion, up 19%, was a bit higher than anticipated, with growth outpacing rivals like Snap, Facebook and Google.

The company noted the first season of The Lord Of The Rings: The Rings of Power attracted more than 100 million viewers worldwide. It was the most watched Amazon Original series in every region of the world, with more than 24 billion minutes streamed, and driving more Prime sign-ups worldwide during its launch window than any previous Prime Video content.

Amazon Studios also announced the all-female slate of directors—Charlotte Brändström, Sanaa Hamri, and Louise Hooper—for Season Two of The Lord of the Rings: The Rings of Power, which is currently in production in the UK.

It said it finished the Thursday Night Football season with the youngest median age of any NFL broadcast package since 2013 and viewership up 11% from last season among 18- to 34-year-olds, according to Nielsen Media Research. TNF featured the most streamed NFL games ever, with an average audience of 11.3 million viewers, according to combined data from Amazon’s first-party measurement metrics and Nielsen Media Research.

Original series and film premiers including Western drama The English, with Emily Blunt;family-friendly competition show Dr. Seuss Baking ChallengeMy Policeman,starring Harry Styles;and documentary Good Night Oppy. Prime Video also released new seasons of existing series, including the fourth volume of Rihanna’s annual fashion experience Savage X Fenty and the third season of Tom Clancy’s Jack Ryan, starring John Krasinski. Wednesday, an MGM-produced series on Netflix, debuted at No. 1 on Nielsen’s weekly streaming charts and earned Golden Globe nominations for Best Musical or Comedy Series and Best Actress in a Musical or Comedy Series (Jenna Ortega).

Amazon also brought HBO back to Prime Video Channels in the U.S., after reaching an agreement with Warner Bros. Discovery. For $15.99 per month, customers who subscribe to HBO Max have access to approximately 15,000 hours of curated premium content.

elentless focus on providing the broadest selection, exceptional value, and fast delivery drove customer demand in our Stores business during the fourth quarter that exceeded our expectations—and we’re appreciative of all our customers who turned to Amazon this past holiday season,” said CEO Andy Jassy, “We’re also encouraged by the continued progress we’re making in reducing our cost to serve in the operations part of our Stores business. In the short term, we face an uncertain economy, but we remain quite optimistic about the long-term opportunities for Amazon. The vast majority of total market segment share in both Global Retail and IT still reside in physical stores and on-premises datacenters; and as this equation steadily flips, we believe our leading customer experiences in these areas along with the results of our continued hard work and invention to improve every day, will lead to significant growth in the coming years. When you also factor in our investments and innovation in several other broad customer experiences (e.g. streaming entertainment, customer-first healthcare, broadband satellite connectivity for more communities globally), there’s additional reason to feel optimistic about what the future holds.”

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