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Amazon, Inc.'s Transparent Attempt to Win More Prime Members

By Tim Beyers - Sep 29, 2015 at 3:00PM

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Emmy wins for "Transparent" lead the e-tailer to lower the price of Prime. Is it a symbolic move, or a strategy to earn more from programming?

The cast and creators of Emmy winner Transparent on stage at last month's presentation at the Television Critics Association. Credit: Amazon Studios. 

Amazon.com (AMZN -3.21%) original series Transparent is piling up the honors. Five times, the show won at the 67th Emmy Awards, including nods to star Jeffrey Tambor for Outstanding Lead Actor in a Comedy Series, and to show creator Jill Soloway for Outstanding Directing for a Comedy Series. Amazon decided to celebrate by cutting the price of a Prime membership from $99 to $67 for one day.

The wins put Transparent in good company. Netflix's (NFLX -3.79%) House of Cards has two Golden Globes to its name, and 17 awards in all. Transparent also has two Golden Globes and 19 awards in all as of this writing, according to IMDB.

Why should you care? As an investor, it's worth asking if Amazon is being generous or shrewd for celebrating the success of one of its key originals.

Does this programming pay? Or is it a loss leader aimed at getting more of us to try Prime in hopes that we'll join the millions of members who already buy more, and more often?

What Amazon says about originals
Amazon CEO Jeff Bezos doesn't specify the earnings from original series, but his 2014 letter to shareholders does connect the dots between programming and profit:

Our business model for original content is unique. I'm pretty sure we're the first company to have figured out how to make winning a Golden Globe [for Transparent] pay off in increased sales of power tools and baby wipes!

But are original series actually bringing in Prime members? In the same letter, Bezos says that Amazon watches a variety of factors when it comes to Prime members who arrive as video consumers. From conversion rates to renewal rates and product purchase rates, Bezos says that the Amazon team likes what it sees, and that plans are "to keep investing here."

Credit: Amazon.com. 

What to look for next
While there's no way to know what that means financially, Hand of God from last year's pilot season kicked off a 10-episode first season earlier this month. Bosch is due for a second season soon, while three new series -- The Man In the High Castle, Red Oaks, and the docu-series The New Yorker Presents -- are expected to debut before year's end.

And then, of course, there's Transparent. Season two debuts in December, and a third is already in development. Amazon is spending plenty putting out new content, even if we don't know exactly how much it all costs. Bezos' letter to shareholders offers reassurance:

An advantage of our original programming is that its first run is on Prime -- it hasn't already appeared anywhere else. Together with the quality of the shows, that first run status appears to be one of the factors leading to the attractive numbers. We also like the fixed cost nature of original programming. We get to spread that fixed cost across our large membership base.

That's important perspective, I think. As much as Amazon's $67 Prime discount day was about celebrating Transparent, it was also a clever way to win more members to absorb the growing cost of originals.

Do you agree? Disagree? Tell me on Twitter or reach out on Google Plus. I may use your comment in a follow-up article.

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