Amazon layoffs hit Prime Video, MGM studio, and Twitch

Amazon is studying what most legacy media firms already knew: Showbiz is hard.  

The e-commerce big is chopping tons of of staff from its streaming and film divisious, in keeping with an inside memo seen by Fortune. The cuts will have an effect on Amazon MGM Studios, Prime Video, and the streaming service Twitch, an unbiased subsidiary that’s nonetheless unprofitable 9 years on from its acquisition. 

That is the second yr in a row that the corporate is launching the brand new yr with job cuts. Final yr, Amazon had two rounds of layoffs that slashed a complete of 27,000 jobs throughout the corporate, together with in HR, its AWS cloud computing unit, and promoting enterprise. 

This batch of modifications at Amazon come as firms throughout the streaming trade are reckoning with the problem of a enterprise that has, to this point, confirmed to have restricted income and excessive bills. Amazon spent large cash to bolster its content material library, together with an $8.5 billion deal to amass the Hollywood studio MGM in 2022, and an 11-year, $11 billion broadcasting deal with the NFL that provides Amazon unique rights to broadcast Thursday Night time Soccer.

Throughout the media panorama, firms are rethinking the technique for his or her streaming providers, which had beforehand prioritized gaining subscribers in any respect prices. Now, with borrowing prices excessive and inflation-strapped shoppers being more choosy about entertainment, Amazon and its friends want to trim down prices and turn out to be extra selective within the content material they make and distribute, all whereas contemplating new sources of income. Some have launched advertisements,  emboldened by trade chief Netflix, which as soon as swore it might by no means have promoting, however added it in 2022. Amazon itself will introduce ads to Prime video exhibits on the finish of the month. Others, like Warner Bros. Discovery and NBCUniversal, have taken to licensing out content material that had beforehand been unique to their very own streaming providers in change for some much-needed money. 

Amazon, like lots of the legacy media firms who additionally function streaming providers—Disney, Warner Bros. Discovery, and Paramount—is realizing it might probably’t proceed to spend endlessly on streaming, a enterprise which has proved tough to scale profitably for all besides Netflix. 

In asserting the layoffs, Amazon signaled it’s chopping headcount to spend on content material. “We’ve identified opportunities to reduce or discontinue investments in certain areas while increasing our investment and focus on content and product initiatives that deliver the most impact,” senior vice chairman of Prime Video and Amazon MGM Studios Mike Hopkins informed staff in a message on Wednesday seen by Fortune

Amazon spent $16.6 billion on content material in 2022, behind solely Netflix and Disney. The prices embrace Amazon’s NFL contract and a really dear Lord of the Rings present, which reportedly value $465 million for a single season. (Full-year figures for final yr’s content material spend aren’t obtainable as a result of Amazon hasn’t reported its 2023 earnings but.) 

Different media firms have opted to chop their content material spending this yr, with Disney slashing its content material spending for fiscal 2024 by $2 billion. In latest public statements Disney CEO Bob Iger stated the corporate made too many films and exhibits for its streaming service, typically on the expense of high quality. “In our zeal to basically grow our content significantly to serve mostly our streaming offerings, we ended up taxing our people, in terms of their time and their focus, way beyond where they had been,” Iger informed attendees on the Solar Valley Convention in November. Disney reported a $512 million loss on its streaming enterprise within the third quarter of 2023. 

Amazon CEO Andy Jassy prior to now spoke optimistically of Prime Video, telling CNBC in June he was “very bullish” in regards to the enterprise. Jassy stated it was each a powerful enterprise by itself and had a constructive halo impact on the corporate’s core e-commerce enterprise. 

Prime Video was initially launched as a glorified advertising software for the free transport subscription Amazon Prime. “What we find is that customers who watch a movie that they love, they buy more Tide,” former CEO of Amazon’s worldwide shopper enterprise Jeff Wilke informed Vox in 2019. “They shop more, they’re more likely to renew their Prime subscription, they’re more likely to convert a free trial into a monthly or annual Prime subscription.” 

However just some weeks after Jassy sang Prime Video’s praises on CNBC, Bloomberg reported he was intently analyzing the funds of Amazon’s studio division. Regardless of its large budgets and buzzy programming, it may be tough to really gauge the success of Amazon’s leisure enterprise as a result of it does not report separate financial results for the division. Secrecy apart, promoting executives are sure Amazon’s upcoming introduction of advertisements will likely be a “tornado” that upsets the streaming trade, as it’s set to turn out to be the most important ad-supported streamer in a single day.