Does Amazon Profit From Its Original TV Shows & Movies?

In news that might spark even more fear in the film and television industry, documents show that Amazon’s (NASDAQ:AMZN) original shows and movies have helped the internet and e-commerce power further bolster its already massive customer base.

Prime Originals

Amazon has spent millions of dollars to pump out a slew of new streaming television series and movies over the last few years. Most investors likely viewed this move as way to diversify and expand its reach in order to one day profit on a quickly-changing entertainment industry. Yet these investments, which include shows such as The Man in the High Castle and Sneaky Pete, have already driven millions of customers to its lucrative Prime shopping service.

The company’s top television shows reportedly enticed more than 5 million people worldwide to become Amazon Prime shoppers by early 2017, based on internal documents reviewed by Reuters. These same documents also show that the company reached about 26 million people in the U.S. across all Prime video content—which also features non-original programming.

The Man in the High Castle cost about $72 million in total and drew 1.15 million new subscribers at an average cost of $63 per customer, based on numbers crunched by Reuters.

What’s the Big Idea?

Jeff Bezos’ first foray into the movie industry began in November 2010 when the company launched Amazon Studios. At the time, the idea was to develop movies with a more grassroots approach. Amazon pledged to offer $2.7 million to filmmakers and writers through a series of monthly and annual awards, of which a few movie and TV projects would begin to be developed—with the help of Warner Bros. (NYSE:TWX) —in early 2012.

“We hope that Amazon Studios will help filmmakers experiment and collaborate and we look forward to developing hit movies," said in a statement.

But Amazon went from offering less than $3 million in total to hopeful movie makers to shelling out $250 million on a new The Lord of the Rings series in just eight years.

Bezos has made original content one of Amazon’s most public endeavors, and Amazon is expected to spend roughly $5 billion on new original programming this year alone. Yet this spend would mark just a drop in the bucket for a company that is projected to pull in $234.22 billion in revenues in 2018.

And in this race towards streaming dominance, $5 billion isn’t even that much. Rival Netflix (NASDAQ:NFLX) plans to spend $8 billion on content in 2018, while Disney (NYSE:DIS) is just getting started.

Disney has already announced a new Star Wars series, and looks set to sell its own over-the-top streaming platform by late 2019. The media powerhouse could pose even more of a threat if its proposed deal with 21^st Century Fox (FOXA) is approved.

Bottom Line

Amazon still makes most of its profit from its web hosting and cloud computing business, which some of its Prime shoppers don’t even know exist. But investors should be happy to see that Amazon is spending money in the TV and movie business right as streaming content truly starts to change the entire media landscape.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>