Amazon.com, Inc (AMZN) finished a deal with BBC America that will make it the exclusive U.S. streaming home for the sci-fi series “Doctor Who.”
On the surface, it seems like no big deal, but when you dig deeper, you see that AMZN scored a big win for Amazon Prime, and potentially a long-term win for equity in Amazon.
“The first eight seasons of “Doctor Who” will be available for Amazon Prime subscribers the week of March 27, with season nine to come later this year. Prior to this deal, the rights to “Doctor Who” belonged to both Netflix, Inc. (NFLX) and Hulu.
With that said, “Doctor Who” is not a ratings monster like “The Walking Dead,” and the fact that both Netflix and Hulu previously aired the program as early as February further suggests that there won’t be 10s of millions of consumers joining Amazon Prime for access to “Doctor Who.”
Furthermore, the ratings for “Doctor Who” have been nothing to brag about. During 2015, the average viewership for Season Nine fell significantly to 6 million from 7.4 million the year prior, according to Forbes.
Why “Doctor Who” Is a Win for Amazon Prime
So, viewership is falling and the show was previously available with two competing streaming services, both of which might seem like a negative at first glance.
The fact that viewership is falling, however, means that Amazon likely purchased exclusive rights at a low cost. In exchange, it gained eight seasons, soon to be nine, worth of content in an industry where prices for exclusive content — new or not, high demand or not — is at a premium.
Earlier this year, Netflix investors learned the company was on the hook for $11 billion in content obligations over the next three years, for content they have already acquired and users have already binged. This perfectly illustrates the high-cost game of content acquisitions in this current environment, and with Amazon having a worldwide e-commerce business with demanding fulfillment needs in place, maintaining those costs is important.
Albeit, the difference between Netflix and Amazon Prime is that the former offers its subscribers video only, whereas video is just one piece of the puzzle for Amazon Prime. Netflix needs an arsenal of high-quality content to attract new users, whereas Amazon may need just one program or series that a consumer really enjoys to convert him as an Amazon Prime customer, due to Amazon offering so much more with the service.
In retrospect, that’s what makes the signing of “Doctor Who” such a big win for Amazon. Ratings for “Doctor Who” may be declining, but its fans are hardcore and deeply devoted. It’s this devotion that has kept the show relevant for 52 years (“Doctor Who” was brought back in 2005 with a new season and a new “Doctor”, director, etc.
With that said, six million loyal viewers may not be a lot by broadcast TV standards, but it is a lot of people. The true value in this deal is that AMZN likely acquired the rights cheap (seeing as how it was an undisclosed amount) and gained hundreds of hours of content, all of which might just be enough incentive to push “Doctor Who” fans and Amazon Prime hopefuls over the proverbial edge to become actual Prime subscribers.
Of course, it is speculative to suggest that “Doctor Who” will lead to more Amazon Prime subscribers, and in turn higher spending on Amazon.com, but it represents an ongoing strategy of investing in content with loyal fans that might also be Amazon shoppers and considering Prime.
Given that Amazon does not need to commit $11 billion on content over a three-year span to match the incentives of Netflix, I conclude that “Doctor Who” was a big win for the growing inventory of Amazon Prime Video consumers, and AMZN stock investors.
As of this writing, Brian Nichols does not own any of the aforementioned securities.
