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Amazon Spent $1.3 Billion on Prime Instant Video in 2014

E-commerce giant touts investment in SVOD content but still trails Netflix in spending

Amazon.com, which is gunning for Netflix in the subscription-video space, invested $1.3 billion in its Prime Instant Video service last year, according to founder and CEO Jeff Bezos.

Netflix, by contrast, spent a net $3.2 billion in 2014 on additions to its streaming-content library globally (accounting for $593 million reduction in streaming-content liabilities), up from a comparable $2.4 billion the year prior, according to its Q4 2014 earnings report.

Bezos revealed the figure for Prime Instant Video — a level of detail the e-commerce behemoth normally doesn’t provide — as part of announcing Amazon’s fourth quarter 2014 earnings. (An Amazon rep clarified that the $1.3 billion encompasses content-licensing and original production expenses.) He touted growth in Prime membership last year, despite a 25% price hike to $99 per year. Amazon’s Prime worldwide paid membership grew 53% last year, and 50% in the U.S. However, the company does not disclose specific numbers Prime users, except that it amounts to “tens of millions.”

“Prime is a one-of-a-kind, all-you-can-eat, physical-digital hybrid,” Bezos said in a statement. “In 2014 alone we paid billions of dollars for Prime shipping and invested $1.3 billion in Prime Instant Video. We’ll continue to work hard for our Prime members.”

On the earnings front, Amazon handily beat Wall Street expectations for Q4 with net income of 45 cents per share, well above analysts consensus estimates of 17 cents per share. Revenue increased 15%, to $29.33 billion, missing analyst estimates of $29.7 billion for the period. In after-hours trading, Amazon stock climbed more than 7%.

Prime offers free two-day shipping on millions of products as well as access to Prime Instant Video, music and other content. According to a survey by Morgan Stanley, the company had at least 50 million Prime members worldwide as of October 2014, implying at least 37 million in the U.S. But it’s not clear how many of those access Prime Instant Video on a regular basis.

As of the end of 2014, Netflix had 57.3 million streaming subs worldwide (39.11 million U.S. streaming subs and 18.28 million internationally).

The total content-spending figures from Amazon and Netflix illustrate that — while they are using original content to generate buzz, aimed at attracting and retaining subs — the bulk of their budgets go toward licensing TV shows and movies from Hollywood. Netflix execs have said they expect to continue to spend 10% of the company’s overall content outlay on original programming. In 2015, Netflix, Amazon and Hulu will spend a projected $6.8 billion on content licensed from studios, versus $5.2 billion last year, according to an RBC Capital Markets report.

In its earnings announcement, Amazon called out its Golden Globes wins for “Transparent,” its original dark comedy series from Jill Soloway and starring Jeffrey Tambor. The company also highlighted Amazon Studios’ new initiative to produce and acquire 12 original movies for theatrical release and early-window distribution on Prime Instant Video this year, as well as its deal with Woody Allen for the filmmaker’s first TV series.

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