David Farnor | On 04, Aug 2017

Amazon will step up its original content spend again this year, as it races with Netflix to produce the next big thing.

Amazon’s latest report for its second quarter shows the online giant’s net sales grew 25 per cent year-on-year to a whopping $38 billion. Its net income, though, dropped 77 per cent to $197 million.

This is something of a routine for Amazon, as well as its rival, Netflix, as both companies invest in growth and development in a gamble designed to pay off further down the line. Speaking in an earnings call about the Q2 figures, CFO Brian Olsavsky notes that the difference was down to investments in fulfilment capacity and logistics services, as well as its Alexa voice platform and associated devices, the ongoing building of its Amazon Web Services platform – and, of course, its investment in online video.

Staff head counts also climbed 42 per cent, with more software engineers and sales teams added to the HR books.

“As far as Q2 is concerned, we were very encouraged by the revenue and unit growth acceleration, particularly in North America,” he said. “We see that tied to the Prime growth and the adoption of Prime and success of that program.”

Amazon Prime is a huge focus for the online shop, as its next day delivery service encourages customers to spend more on Amazon products – and original video is a key part of the bundled incentives that go with an Amazon Prime membership. The fact that Amazon Prime Video is also a standalone subscription, though, and that Amazon has won multiple Golden Globes in recent years for its projects, is a sign of how seriously it takes video in its own right.

It should come as no surprise, then, that Amazon once again plans to step up its investment in original content, building on a “significant” increase in content spend between the second half of 2016 and the second half of 2015. Indeed, in Q2, Amazon’s spend on technology and content grew 51 per cent year-on-year to $633 million, with spend on marketing up 66 per cent to $133 million.

“We’ll be increasing video spend on a sequential and year-over-year basis in Q3,” said Olsavsky, who particularly noted the recent launch of Inside Edge, the first of 18 planning Indian original shows.

As a result, Q3 sales are forecast to rise between 20 and 28 per cent to somewhere around $40 billion.

The content race continues.

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