Amazon stays mum on Twitch plans, original content spend as investor jitters climb

Executives of online retail giant and SVOD provider Amazon (NASDAQ: AMZN), in the wake of a third quarter in which it posted record losses, were more subdued on the company's earnings conference call when it came to talking about their online streaming plans.

Unlike last quarter, no mention was made of how much Amazon will spend on original content in the next three months. And, with the Twitch Interactive acquisition having closed only a month ago, Tom Szkutak, chief financial officer, stayed diplomatic on his response to questions about where the live-streaming, gaming-focused service fit into its overall video strategy.

Szkutak said they are "very excited" to have Twitch on board.

"We've been in video games for quite some time and we think that it's a very creative team. They're doing some very innovative things on behalf of their customers and our customers and so we're excited to have them, be part of Amazon and look forward to working together with that team," he said.

Amazon still has faith in the success of its original content portfolio, too, Szkutak confirmed, adding that Prime Instant Video is driving subscriber retention.

"We continue to invest heavily in video content including originals and there is a number of different metrics we're looking at certainly from a Prime standpoint," he said, "but what we're seeing so far are those customers who are streaming are renewing at considerably higher rates … at a rate that's already high."

Prime's online video offering is a key factor in conversion rates, he added. "When customers come in for … free trials and they engage from a video content standpoint, we see the conversion being higher." New Prime members are also buying other products from the retailer once they've joined, he added, a pattern that Amazon is paying close attention to.

"(W)e like what we see and we have a long way to go there, but we're concentrating on building great service and we see that customers are rewarding us with engagement on the content, both original and licensed…" he added.

Amazon's price increase on Prime membership earlier this year, from $79 to $99, has not had a big impact on subscriber growth, with Szkutak noting that subscriber retention has been "great."

"You're correct in that we're investing in Prime in a number of different ways including video content. As I talked about earlier that is certainly the way we'll get a return on that investment," he said.

Still, Amazon's apparent success with Prime Instant Video (the company doesn't break out numbers for the service) isn't going to carry it over the roiling waters plaguing its other units. The company posted a $437 million loss overall, or 95 cents per share. Szkutak noted that it took a $170 million hit related to its Fire Phone, which is rumored to have only sold in the thousands since launching in June.

Revenue fell short of analyst projections, reaching $20.58 billion--a 20 percent year-over-year climb, but below the $20.84 billion expected.

And it's not expected to get better in the fourth quarter, with Amazon projecting a loss of $570 million and revenues between $27.3 billion and $30.3 billion. Those numbers are already below analyst predictions for the usually lucrative holiday season, of $30.9 billion.

Shares on the Nasdaq plummeted as much as 12.89 percent in after-hours trading Thursday immediately following the announcement. Amazon recovered somewhat in Friday mid-morning trading to $292.27, about 6.75 percent below its closing price.

Amazon Q3 net income

Amazon posted a GAAP net loss of $437 million. (Source: Amazon investor relations)

For more:
- listen to the earnings call
- read the earnings release
- Engadget has this story
- Business Insider has this story

Earnings roundup: Sizing up pay TV earnings for the third quarter of 2014

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