Could Amazon.com's Original Content Boost Prime Subscribers?

There was quite a kerfuffle when Amazon.com (AMZN -2.44%) announced it was increasing the price of its Prime membership from $79 to $99 a year, and almost all of it was centered around whether or not you saved enough with the service's two-day free shipping to make it worthwhile.

The debate by and large ignored the free-streaming-media side of the service, but with the introduction of Amazon's Fire TV, the company is politely asking us to start paying attention. Is it possible that Amazon's streaming content could drive growth of Amazon Prime memberships going forward?

Amazon Originals
In May 2012, the company announced it would develop and produce Amazon Original comedies and children's pilots and let audience feedback dictate what shows would turn into series available for streaming, putting Amazon in league with Netflix (NFLX -8.66%) and Hulu in the arena of original online content. For reference, in January Amazon reported it had at least 20 million subscribers to its Prime Service, while Netflix just announced it had 48.4 million subscribers worldwide at the end of the first quarter.

Of its Amazon Original six comedies in 2013, the company ordered just Alpha House and Betas to series. Alpha House has since been renewed for a second season. Three children's series were also ordered. The company grew its 2014 slate with the addition of several drama projects. Amazon Studios ordered two hour-long shows to series: The After, from X-Files creator Chris Carter, and Bosch, from Michael Connelly and Eric Overmyer.

The inclusion of dramas is significant, as Netflix established itself as a player among broadcasters when its Kevin Spacey-starring House of Cards brought home the Emmy for outstanding drama series, in addition to two other Emmys and six additional nominations.

While Netflix's viewership isn't tracked the way traditional broadcasters are, culturally, programs like House of Cards and Orange Is the New Black are generating tons of word-of-mouth buzz, fostering a binge-watching phenomenon reinforced by the company's strategy of releasing an entire series all at once. Viewers need to watch quickly if they don't want the story spoiled online.

Release schedules
So far, Amazon is not following the Netflix release strategy. The first three episodes of Alpha House were released at once, but then the remaining eight were released one week at a time. The company also repeated its 2013 pilot-viewing pattern for 2014, posting all 10 Originals in contention for Prime members (and those who signed up for a free trial) to view and provide feedback.

With its series orders completed, Amazon seems unlikely to release all episodes of a show at once. The company analyzed social media and found that conversations about all-at-once shows declined faster than conversations about shows that air once a week.

2014 prime-time Originals
So, will Amazon's new shows be able to generate the word-of-mouth the company is hoping for? Let's look at what Amazon has ordered to series.

Source: Wired.com. 

Whether or not these projects can generate enough word-of-mouth to increase membership for Amazon Prime, the pilots' release strategy did open up one new source of revenue: ad spending. Anyone watching one of the new pilots would have to first pass through a commercial from Geico. Subsequent series episodes, though, will be streamed without ads. The pilot sponsorship was part of a larger agreement that included placements on the retail portion of Amazon.com, Kindle Fire, and the Amazon-owned film and television website, IMDb.com. Geico did not release any dollar figures for this deal.

Bottom line
It's likely we are just seeing the early potential of Amazon's Originals. But if the company's hunch about increasing viewer chatter is right, we could see Prime memberships rise and a more serious competitor to Netflix developing.