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Is Amazon’s Original Programming a Threat to Netflix?

By Brett Gold - Mar 15, 2014 at 11:34AM

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While Netflix is win the streaming war for the moment, Amazon's strategy to develop its new shows could prove to be a game-changer ... and one that maybe should be adapted by the traditional networks.

In the current battle to win over online audiences, Netflix ( NFLX 2.10% ) is the current champ, but Hulu Plus and Amazon Prime are quickly becoming threats. Yet Amazon.com's ( AMZN 2.80% ) approach is radically different, and many wonder if that could be a sign of what's to come.

Audience in control

Amazon drama series 'The After' (Credit: Amazon)

Netflix and Hulu Plus have followed the traditional network model of choosing scripted original programming -- they pick for its audiences and hope for the best. Amazon's strategy fits in more with the company's overall business strategy of giving consumers a choice.

Pilot season is an annual event in the television industry, and while networks like Fox have put a halt to the practice, it is still very commonplace and probably will be for some time to come. Networks commission a test episode (aka "pilot) of a new series with high-level talent attached and then choose which ones they think are the best fit for its lineup.

The catch is that networks can only pick a finite amount of pilots to make air as they only have so many holes to fill. Amazon doesn't have that limitation. For two years the company has been releasing its pilots online for free and then ultimately bases its orders mainly on audience feedback.

Giving that type of power to consumers is a genius concept and one that should be expanded to the network model. If ABC had presented a show like Lucky 7 to audiences ahead of green-lighting it last fall, executives would have learned viewers had no desire to watch it. After all, in that particular case we've seen it play out before -- it was an NBC summer series called Windfall and nobody watched that one either.

Drama

Amazon drama series 'Bosch' (Credit: Amazon)

Amazon also made sure the choices it gave to consumers weren't lower-quality either as each of the pilots had several big names attached in front of the camera and behind the scenes. Names like Chris Carter (X Files), Jeffrey Tambor (Arrested Development), and Roman Coppola (Moonrise Kingdom) are among the creatives looking to get involved with the new medium.

Earlier this year, Amazon tested five pilots (with another five aimed at kids), including two dramas and three comedies. The public spoke and of those five, four are moving forward, with one being put on "hold." What stands out among the four selected though is that the two dramas mark the studio's first foray into the genre. Last year Amazon only tested comedies and children's programing and this year expanded out.

Audiences seemed to have liked their drama choices, which included the apocalyptic The After from Carter and Bosch, a thriller starring Hollywood journeyman (and fan favorite) Titus Welliver (The Good Wife, Lost), based on the popular books by Michael Connelly. Both are not only solid choices but ones that could have easily found a way onto a network or, more likely, cable pilot slate. Those are names and concepts that have widespread appeal.

Results

Amazon comedy series 'Alpha House' (Credit: Amazon)

So how did this work in year one? 50/50. Of the two shows picked up in 2013, Alpha House and Betas, only Alpha House will be returning and that has a lot to do with having a "name" lead like John Goodman attached. Now Alpha House wasn't a huge pop culture smash, but it served its purpose and made a buzzy splash, which is exactly Amazon both wanted and needed to happen. It sent a message to the industry that Amazon was taking a big step in positioning itself as a force to be reckoned with going forward.

In addition, Amazon already has the exclusive streaming rights to "it" shows Downton Abbey and Orphan Black among others. If it can get the original side going as well, Amazon will be in a position to make a run at Netflix, but that's still probably at least another year or so away from happening. Regardless, Amazon is as forward-thinking in this area as CEO Jeff Bezos is with his entire company. Creativity like that can't be ignored, no matter what the medium.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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