Leaked documents show Amazon’s TV gamble is paying off strongly, with The Grand Tour leading the way

Alan Martin March 16, 2018

Back in 1994, Amazon’s mission was clear: sell lots of books. In 2018, that simple aim has changed a bit: sell lots of books (and clothes and computer hardware and coffee machines).

Leaked documents show Amazon’s TV gamble is paying off strongly, with The Grand Tour leading the way

But in 2018, the internet has lots more people chasing that aim, so the method behind the mission has got more sophisticated. The Kindle makes people buy books exclusively from Amazon; the Echo and Dash buttons nudge people towards fuller digital shopping baskets; and original TV programmes streamed via Fire TV make people members, encouraging them to exclusively buy from Bezos. That last point isn’t tin-hatted conspiracy theorising – it’s straight from the horse’s mouth. “When we win a Golden Globe, it helps us sell more shoes,” CEO and founder Jeff Bezos said back in 2016.

Previously, only Amazon knew whether this was just a nice theory, or if it’s actually backed up by evidence, but leaked documents obtained by Reuters seem to show there is hard-nosed business acumen behind Amazon’s pursuit of television.

The top line is this: between late 2014 and early 2017, 19 original Amazon programs drove more than five million people to take out Prime accounts on Amazon. That’s roughly a quarter of total Prime signups for the period, Reuters believes. A Prime account (usually £79/$99, with student discounts available) not only gives you unlimited streaming but also provides free one-day shipping and various other perks.

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From the documents, it’s clear that the strategy is paying off for the company, but not every programme is created equal. One of the big successes – the first season of The Man in the High Castle – is credited with tempting 1.15 million people to tap in their credit card details. Given the show cost $72 million in production and marketing, Amazon estimates that the show drew in new subscribers at a rate of $63 per head.

Amazon has a slightly clumsy metric of measuring which shows drove subscriptions, but it’s hard to think of a better one: it measures the first program streamed after sign up. That, of course, means that if people came for Sneaky Pete, hated it, but then got really into Transparent, it would still show up as a point for Sneaky Pete. leaked_documents_show_amazons_tv_gamble_is_paying_off_strongly_with_the_grand_tour_leading_the_way

Nonetheless, a sign up is a sign up, so it’s hard to argue too hard. What the data shows is that despite its relatively high production costs of $78 million, the first season of The Grand Tour was the most successful driver of Prime subscriptions at just $49 per subscription. Alongside The Man in the High Castle, the first seasons of Bosch, Hand of God and Goliath all converted at a rate of under $500 per first stream too, with costs of $158, $356 and $492 respectively.

Interestingly – or perhaps depressingly predictably – the most critically acclaimed content on Amazon seems less cost-effective overall. Transparent, the winner of eight Emmy awards, had half the viewers of The Man in the High Castle making it relatively unhelpful in Amazon’s greater mission to sell shoes (although that unfairly overlooks its appeal in attracting film talent keen for critical recognition). Likewise critically-acclaimed drama Good Girls Revolt attracted just 52,000 ‘first streams,’ – a poor return given its $81 million production costs, and it’s unsurprising it didn’t get a second season.

Still, it’s pretty clear that overall Amazon’s gamble is paying off. While Netflix’s ultimate goal is to attract and maintain paying subscribers, for Amazon, that’s just the entry point to a far longer funnel. And as long as video subscribers are doing all their shopping on Amazon, you can fully expect the company’s television experiment to continue.