Hello friends. This is Jason Del Rey, luck’s new technology reporter.
I’ve spent much of the past decade reporting on Amazon and its successes, failures, opportunities, and shortcomings—both for the online tech publication Recode (RIP) and in my new book, Winner Will Sell All.
However, at various points during that time I have struggled to understand the logic behind some of the company’s big bets. One of these has been Amazon’s ambitious and incredibly expensive investments aimed at becoming a major player in the TV and movie streaming business.
When Amazon first introduced Prime Video in 2011, the content library was so uninspired that Jeff Bezos decided to give it away as part of the Prime shipping program.
“I remember Jeff using those exact words — it was, ‘By the way,’ Bill Carr, a former video executive at Amazon, told me years ago. “‘Yes, Prime is $79 a year. Oh, and by the way, there are free movies and TV shows with it. And if it was free, how much could consumers complain about the quality of movies and TV shows?”
But over time, Amazon has become one of the most aggressive spenders in the entertainment industry, worth tens of billions of dollars. While company executives have long argued that Prime’s video business helps the company’s retail engine sell more products, Amazon’s own employees have sometimes had their doubts.
As technology journalist Brad Stone wrote in his book 2021 Amazon Unbound, The Amazon video staff he spoke to “found little evidence of a link between viewing and purchasing behavior, especially to justify the large spend on video.”
According to Stone, the truth is that Amazon was making TV shows and movies because “Bezos wanted Amazon to make TV shows and movies.”
What will happen after Bezos announces in February 2021 that he is handing over the CEO role to longtime AWS chief Andy Jassy? Well, the video bets kept coming. Shortly after Bezos announced his successor, Amazon announced it had acquired the rights to Friday Night Football in a deal that runs through 2032 and is worth about $1 billion a year. A year later, the tech giant acquired MGM for $8.5 billion, its second-largest acquisition ever.
But there are also signs that Amazon’s video initiatives under Jassy are a little more bottom-line focused. Earlier this month, Amazon cut hundreds of corporate jobs in its broadcast and studio businesses. And in a big change, Amazon Prime Video movies and TV shows will start including ads on January 29, unless customers pay an extra $2.99 per month for an ad-free tier.
At the same time, the company is making moves to acquire more live sports rights, agreeing to invest more than $100 million in a regional sports network that could give the tech giant broadcast rights to more than three Major League Baseball teams. , the National Hockey League and the National Basketball Association. Live sports video business sources say Jassy is particularly keen and hopes the company will attract more lucrative TV advertising as it is one of the last bastions of match viewing. Amazon’s $40 billion advertising business is already one of the company’s most profitable segments.
When Fortune CEO Alan Murray asked Jassy in a recent interview to name the company initiatives he was most excited about, it should come as no surprise that the Amazon CEO started with:
“I’m very proud of what we’re doing with Prime Video.”
Amazon reports financial results for the holiday quarter next week, and much of the focus will be on the tech giant’s core retail business and what executives say about the current behavior of the average American consumer. But I’ll also be very interested to watch for any indication of where Jassy and Amazon are going with this very expensive, disposable side hobby.
Jason Del Rey
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This story was originally featured on Fortune.com