Amazon’s Piecemeal Approach to Original Content Can’t Compete with Netflix

Remy Merritt |

Amazon, Netflix, House of Cards, Orange is New Black, Amazon Prime, Netflix original contentAccolades for Netflix’s (NFLX) original series continue to stream in, but Amazon (AMZN) is trying to catch up. The massive media network plans to produce six new original series for release to its Amazon Prime customers — customers who themselves decided which pilots Amazon would order to series.

How Netflix Knows What You Want Before You Do

Netflix has a viewer-feedback function, but its consumer prediction relies primarily on indirect data collection. Rather than asking its audience for their written reviews, Netflix has broken down every film it has available into microgenres. Their algorithm for suggested content is based on giving the consumer what they didn’t know they wanted through an algorithm that crunches the numbers on 76,897 different microgenres, from simple “Slapstick Satires” to “Foreign Drama with a Strong Female Lead.” Rather than creating a blanket category of “Suggested for You,” Netflix has run the numbers on every viewer to personalize their collection of suggested content.

And the data was enough. Netflix never tested a pilot system, and took the numbers straight to production. The same strategy of content suggestion was applied in determining what subscribers would want in a Netflix original series, and House of Cards’ sweeping success is largely attributed to the analysis of the most popular sitcoms, movies and television series that subscribers were streaming. In the case of Orange is the New Black, Netflix managed to intertwine a variety of desired content features to produce a series whose microgenre is best described as "Darkly Comedic Prison Drama with Strong but Unlikable WASPy Female Lead and Complicated Lesbian Relationships.” Difficult to imagine, but brilliantly and successfully executed by Netflix producers.

Amazon Encourages Subscribers to Vote Directly

However, Amazon has taken a more traditional, over-the-table approach in its relationship with its audience. In the latest round of pilots, the media giant developed ten first episodes that could be developed into full-fledged series, similar to how the network system operates, but then used crowdsourcing to determine which would be taken into production. Amazon Prime customers had free access to all ten pilots, and were encouraged to weigh in on each. Based on direct customer reviews and a process of elimination, Amazon chose six to take to the sets.

Amazon’s target audience is similar to Netflix, as most viewers are adults at home looking to jump into the settings of their favorite shows. But unlike Netflix, Amazon is also aggressively marketing its original children’s series, promising education and entertainment for its youngest viewers.

Netflix is paying attention. On June 16, it announced plans for a film and accompanying animated series based on the popular Mattel doll franchise Ever After High. The 12-episode series is slated to roll out in early 2015.

But regardless of similar content, Amazon’s approach is particular to the specific words and desires of the viewer. As a result, its six new series may ultimately be piecemeal; those who watch cop dramas voted Bosch through the pilot round, and for those seeking a comedy-meets-smart-soap-opera, Mozart in the Jungle promises sex, drugs and oboes in the underworld of New York classical music. Whereas Netflix’s pride-and-joy series combined a multitude of interests into singular titles, Amazon’s reliance on direct customer feedback has selected series in narrowly specific genres.

This may be why Amazon’s acquisitions budget is growing, with a greater percentage devoted to original content production.

Battle of the Budgets: How Much Are They Devoting to Original Content?

Netflix has been forthcoming about its costs to produce, disclosing a price tag of around $100 million for each original series. It reserves about $4 billion each year for acquisitions and content production.

Amazon is more discreet about their original content budget, but their financial reports and correspondences with reporters revealed $1.383 billion was spent in 2013 on “technology and content.” Additionally in 2013, Amazon announced it would devote $1 billion alone to future production of several original series. If split between this year and last, that would mean an annual budget of $500 million for original content, $100 million more than Netflix and the full cost to produce the entire series of House of Cards.

In its most recent 10K report, Amazon forecast an increase of $600 million in acquisitions spending for 2014. How much of this will go to original content is unknown, but with the confidence of directly crowdsourced feedback, it is likely a significant portion of their boosted budget will go toward competing with Netflix. Increased spending on exclusive content rights for both existing popular series like Fox hit series 24 as well as on original content production appears to be Amazon’s strategy for edging into Netflix’s domain.

The increasing focus on original content is further differentiating Amazon as the most diverse media ecosystem available, offering everything its Apple (AAPL) and Google (GOOG) competitors broadcast and adopting the original content that set Netflix apart.

This is Amazon’s second pilot season, with a much higher batting average than last year. In 2013 it released eight comedy pilots but only produced two; this year, four out of the five mature audience-oriented pilots have been pursued into full series and two of the five children’s series are in development. However, its piecemeal approach to production may ultimately show less success than Netflix’s strategy of a small selection of all-inclusive, well-rounded series. Rather than united by one or two sweepingly popular shows, Amazon’s viewership will be split between its individual interests much as they already are with third-party content.


DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


Symbol Name Price Change % Volume
AAPL Apple Inc. 116.60 -0.46 -0.39 23,192,665
AMZN Inc. 818.99 8.67 1.07 2,793,015
GOOG Alphabet Inc. 799.37 2.40 0.30 1,266,181
NFLX Netflix Inc. 127.50 4.15 3.36 18,832,428
ORRAF Orora Ltd 2.38 0.00 0.00 0


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