“My darling!” – That’s what Amazon founder Jeff Bezos must have thought when his company managed to secure the rights for a series adaptation of the fantasy epic “The Lord of the Rings”. Like the poor creature Gollum after his beloved ring, Amazon was after the book brand that shaped the fantasy genre and made film history in the early noughties with director Peter Jackson’s opulent cinema trilogy.
Amazon is said to have spent up to 250 million US dollars just for the permission to shoot a “Lord of the Rings” series. That was a record sum, which seems all the more gigantic when you consider two things.
First of all, despite this gigantic investment, Amazon has only acquired the series rights to certain elements of the great “Lord of the Rings” story and not the entire package. That is why The Lord of the Rings: The Rings of Power is set thousands of years before the known adventures of the hobbits Frodo and Bilbo. It’s about the young elf Galadriel and the evil aggressor Sauron, but other than that, the series won’t feature many characters that audiences are already familiar with.
Second, the $250 million for the rights should be multiplied in production costs. Five seasons are to be created, the actors have to be paid, the sets built and the elaborate effects financed. Amazon is believed to have paid a total of more than $1 billion for The Lord of the Rings: The Rings of Power – an unprecedented sum for a series.
Assuming that the other four seasons will each have as many episodes as the first season, which started September 2, the average budget per episode is $25 million. In comparison, the eighth and final season of the hugely successful “Game of Thrones” main series was downright cheap: $15 million per episode was said to have been spent on the worlds and battles of this other popular fantasy series.
Streaming giant Netflix, on the other hand, is said to have paid around ten million dollars per episode for the first season of the similar series “The Witcher”.
Netflix and Amazon Prime Video are both streaming services. But while Prime Video is just one section of a company that specializes in selling goods online, Netflix doesn’t offer anything other than streams.
Therefore, Netflix is all about selling subscriptions and giving users enough reasons to keep their monthly cancellable subscription.
Netflix spent $11.8 billion on the production of its own content in 2020, compared to $17 billion in 2021. They flowed into series and films that can only be seen there. If you want to get the creeps out of “Stranger Things” and if you want to languish in “Bridgerton”, you have to go to Netflix, the world’s largest streaming provider with a good 220 million subscribers.
Netflix succeeds. In contrast to providers of music streaming, for example, the group makes a profit, it was 5.12 billion US dollars in 2021. The large mountain of debt and the latest headlines about the fallen stock market price do not change that (the market leader had in the first half of 2022 lost more than a million subscribers). Especially since Netflix is looking at spending a lot more than it did five years ago. Series that do not meet the internal criteria for success are now being rigorously discontinued.
And what about Amazon Prime Video? According to the company, Amazon Prime had more than 200 million subscribers worldwide at the beginning of the year. However, this includes all customers of the service, which is first and foremost a service for the fast delivery of ordered goods. The streaming users are not shown separately. And unlike Netflix, Amazon is keeping a low profile when it comes to the number of views of the individual series and films.
Nobody outside the group can really judge whether Amazon Prime Video is profitable or not. Like Netflix and the third major streaming service Disney, Amazon also relies on exclusive films and series. One of the biggest hits to date is likely to have been the elaborate, brutal superhero series “The Boys”.
But there is still a lot more to do. “The Lord of the Rings: The Rings of Power” is now the high point in the range so far in terms of the dimensions of the production and the expected interest of the viewers. “Bring me the next ‘Game of Thrones’,” Jeff Bezos is said to have given his Prime people as a not very modest goal. But why is Amazon, whose core business is selling goods online and offering server services, actually afford an expensive film and series production?
Because the streaming offer is a bait. “When we win a Golden Globe, it helps us sell more shoes,” Jeff Bezos said in 2016 about awards for films and series and the public attention that goes with them. Amazon productions have won several times at renowned awards shows:
The dramedy series “The Marvelous Mrs. Maisel” won 20 Emmys, the cinema drama “Manchester by the Sea” won two Oscars.
According to Bezos, streaming customers are more likely to renew their Prime subscriptions than Prime customers who don’t watch videos. Prime customers also bought more products from Amazon than people without subscriptions.
“The idea is that everything at Amazon inspires and stimulates each other,” says Dr. Florian Kerkau the daily mirror. Kerkau is the founder and CEO of Goldmedia, a company specializing in media research. Kerkau’s specialty is streaming.
According to Kerkau, it is not absolutely necessary whether Amazon Prime Video – in Germany, by the way, the number one streaming service ahead of Netflix and Disney – covers its costs.
In Amazon’s corporate strategy, a series like “The Rings of Power” is above all a gigantic advertisement to attract new customers, keep old ones and ultimately more smart speakers, toilet paper and whatever else is among the top sellers in the market Assortment is for sale.
Amazon has long since stopped focusing primarily on small, cheap productions that win prizes and mean prestige in Hollywood. The group aims at the mass audience – and with it the pressure to succeed with a series like “The Lord of the Rings: The Rings of Power” increases.
In 2018, the Reuters news agency was able to view internal Amazon documents. The group’s calculation for Prime Video therefore compares two key figures: the production and marketing costs of a title on the one hand and the number of new Prime subscribers gained as a result on the other.
This allows Amazon to calculate how much was spent per new customer for each series. A comparison of these figures then shows which production is worthwhile and which is not
The math behind this is simple: with a cheap production, fewer new subscribers need to be added for the bottom line to be worthwhile – an expensive series like “The Lord of the Rings: The Rings of Power”, on the other hand, has to hit the ground running.
It is a starting advantage that “The Lord of the Rings” falls into the booming fantasy genre – and is one of the best-known brands in the world. From the almost unmanageable mass of weekly streaming restarts, a series automatically stands out that revolves around the elves, wizards and rings devised by J. R. R. Tolkien.
Nevertheless, Jennifer Salke, the head of the Amazon Studios department responsible for films and series, should only have a few quiet nights after the start of the “Lord of the Rings” series. One might get the idea that a flop in the fourth most valuable company in the world wouldn’t be so bad. But “Amazon has no interest in losing billions either,” says Dr. Florian Kerkau. “It must be worth it.”
Viewers will be able to easily determine whether it will have been worthwhile for Amazon. The group may refuse to publish meaningful internal data, but whether “The Lord of the Rings: The Rings of Power” will really be five seasons as planned or will be canceled beforehand due to lack of success, everyone will know.