How Amazon Advanced Its Prime Video Down The Court To Set Up Bigger 2025

Summary:

• Amazon’s Prime Video made significant strides in 2024, notably by introducing an ad-supported model and growing its programming.
• Prime Video’s success with high-profile series, a continued push into sports, and strong feature film performances underscores its growing influence.
• Amazon’s decision to send tentpole films to theaters prior to streaming has proven to be a substantial market differentiator – despite many not understanding its true value.
• Despite the opaque nature of streaming metrics, Amazon’s consistent positive results and strategic moves position its Prime Video group (and the company overall) favorably for 2025.

Big tech’s entrance into the entertainment sector has resulted in a number of paradigm shifting developments. Each year their integration into this world gets deeper and deeper and 2024 was no different. While the inclination with many would be to rank their performances at this time of the year, it’s become a bit of a fool’s errand.

Each could make a case why 2024 was their year but for the moment I want to focus in on Amazon (NASDAQ:AMZN). The company’s Prime Video division made some big moves in the past twelve months and in the process silenced a lot of critics. Yes, many naysayers are still missing key points, but that is expected in this field. For the savvier investors though, it is clear the momentum shift is not likely to change in 2025.

So what did Amazon do, and what did investors learn?

First as always, some background.

Going into 2024 shareholders knew Amazon had multiple strategies in play that had been rumored but not confirmed. Each would be a big deal on its own, but what the company did was execute on several of them in smart succession.

The first was following suit with the ad-supported model.

Amazon was no stranger to this area due to its now-shuttered Freevee service, and soon after it closed, the talk was it meant ads would soon make their way over to the mothership. The significance of that move can’t be understated.

Suddenly, Prime became the largest ad-supported subscription streaming service. With billions in commitment from companies, the great linear exodus would only become greater as more of those ad dollars began shifting to streaming.

What’s also interesting is that while Prime has given users the ability to opt-out of ads for $3 more a month, early returns look like customers are good with the switch.

The result… more ads likely to come in 2025 and for the first time, ads in new markets. While the test started in a few key countries like the US, UK and Canada, its success will now be duplicated in places like Japan, Brazil, New Zealand, India and The Netherlands.

The full breadth and depth of Prime’s customer count has (unsurprisingly) not been fully revealed, but we know its sizable and that block is too powerful to be passed up on by advertisers. Let’s also be clear, this isn’t just happening because of Prime’s reach, it’s happening because Prime went out of its way to keep that reach.

These advertisers aren’t putting their money behind cash-grab series that won’t last more than a season. They are supporting more critically acclaimed cross-over fare that is dominating the conversation. The service’s Mr. & Mrs. Smith and Fallout are two of the best examples. Many networks have tried to adapt movies and video games into series and more have failed than succeeded.

Prime stuck the landing in both cases.

And that’s just scripted, Prime continues to succeed with its NFL deal with over 13 million viewers estimated to be tuning in on average every week. That marks year-to-year gains and with its deal now including flex-game options and a play-off game those gains should grow.

You could make the case Prime’s success here is what motivated Netflix (NFLX) to finally pivot its stance on “live” and see its value. In either case, though, you can look at Prime’s model and see why Netflix’s recent tech problems shouldn’t be a concern for investors.

As I wrote the other week, the buffering/lag problems that plagued the Mike Tyson/Jake Paul fight wasn’t a great look for a tech company – but there’s little reason to think that will continue to be an issue for the long run. Remember, Prime had the same problems when it first debuted Thursday Night Football, and it caught the same level of criticism.

Not only did Prime continue to thrive, but its eventual success had led to them being able to add the NBA to its roster in 2025.

The NBA deal is also significant as you’ll remember the controversy over the recent rights deals. Warner Bros. Discovery (WBD) decided to play a game of chicken with the league with its rights package and things went sideways quickly.

As a result, Prime Video was able to pick up that package of games which will fit nicely into the company’s portfolio. The NBA is a natural expansion of Prime’s sports stable and the company has revealed that the league will work with them to grow its plan to essentially own Black Friday.

And then came the big tentpole – Red One.

A holiday spectacle in the works for a few years starring Dwayne Johnson. This was Amazon’s big tentpole, but it was also the one with the biggest baggage. The movie carried a reported $200+ million budget that ballooned over the shoot and a lot of the blame shifted to Johnson.

Yet here’s the thing, while the media was fixated on Johnson, Amazon remained fixated on their project. In a shrewd move that has begun to become the norm for the company, Red One was shifted from a streaming first film to a theatrical first film. It was the move many had hoped Netflix would do with its Johnson vehicle Red Notice from a few years back.

Part of the idea was to give the movie extra pre-platform exposure and at the same time make some of the cost back. It was a plan Amazon has begun using more and more to great success. What many critics failed to note was to the studio, it was irrelevant if the movie made $5 million or $50 million, it was elevating the project in the eyes of the public.

Now you really were getting theatrical movies at home, verses theatrical level movies at home – there’s a difference.

And as per custom with theatrical movies, you get the pundits poking at the numbers. Many were quick to pounce on Red One for a low by comparison initial box office debut – but to quote Johnson’s in-ring alter ego – “it doesn’t matter what you think.”

The truth is, as long as the movie made back the cost of the theatrical campaign, it’s a win for the studio.

And what happened was Red One globally is estimated to have made $175 million – so to put it plainly, the movie made back a sizable amount of its budget before it even hit the service. Now anything Amazon makes from the platform puts it closer to profitable.

And how did it do on the service?

Amazon has revealed the film had 50 million views and was the most-watched original of the year.

While that’s a positive development, investors do need to keep one thing in mind. Streaming is still the wild west and while Amazon and other third-party trackers have given us a lot of data to work with, most of the numbers are still shrouded in secrecy.

We are effectively taking Amazon’s word.

And that’s not an Amazon thing, Netflix started that trend years ago – it’s just become the norm. The streamers have the unique leverage to parse out whatever data they want and spin it however they want, and we don’t have much of a choice to but to take it at face value.

50 million views for Red One sounds impressive, saying it is the most watched original of the year sounds even more impressive, but we don’t know what that translates to in dollars. We also can’t truly compare projects from different streamers because there is no standard and each measure differently.

That said, whether it’s Red One, the NFL or any of Prime’s originals, there’s a consistent drumbeat of positive news in the pipeline for Amazon shareholders. Investors are still able to see some types of tangible results that have some types of numbers behind them… whether those are hard and true or optical illusions is less important.

This is an industry of perception, and the perception is Prime’s 2024 has set it up nicely to enter 2025.

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Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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