How much is Amazon paying to get its hands on HBO’s old shows?

A lot! But less than some people might have thought.

Jeff Bezos’s company will pay HBO more than $300 million over the course of the three-year term, according to multiple people familiar with the deal.

That’s a big sum for Amazon, but also very doable: The retailer generated sales of $75 billion last year, and is thought to be spending at least $1 billion a year to build up its streaming video catalog.

That money is also very nice for HBO, since selling repeats on the Web is a very high-margin operation. But HBO was already doing very well: Last year it generated operating income of $1.7 billion on revenue of $4.9 billion.

The fact that HBO isn’t getting more for its old shows, like “The Sopranos,” helps underscore the idea that HBO isn’t radically changing its model by selling them to Amazon.

Yes, selling its old shows to an online subscription service is a new thing for HBO. But it’s a thing that is supposed to keep its existing business intact by keeping its new shows locked down for three years. And it is keeping its most popular show — “Game of Thrones” — out of Amazon’s streaming service altogether.

Chocolate Milk-sheik
Chocolate Milk-sheik

This is a great deal for Amazon.  If their cost is $100M per year, that could've produced ten or fifteen original shows.  Who knows how many of those shows would've been hits?  For that same $100M, they're getting The Sopranos, The Wire, Deadwood, Six Feet Under, Band of Brothers, and earlier seasons of more current shows...all proven hits.  Possibly more importantly, they're distinguishing themselves from Netflix.  

The next checkbox for Amazon should be to get PIV on the AppleTV, pronto.

Brad Church
Brad Church

@Chocolate Milk-sheik  It appears to be a win for Amazon against Netflix, but I'm not as sanguine about the prospects.

While it's undeniable that some of these shows are excellent, and still very much talked about by critics and fans, they are all relatively old shows.

The Sopranos first aired in 1999 and ended its run in 2007 (seven years ago.)

The Wire wrapped up in 2008. Deadwood in 2006. Six Feet Under in 2005. And the Band of Brothers miniseries was a brief spark in 2001.

It's safe to say that these shows are not really going to pick up a lot of new viewers now that they've available on Amazon Prime. Instead, they'll pick up the so-called "long tail" viewers.

Will that trickle of long tail viewers be enough to enable Amazon to profit on its $100 million-per-year cost to buy these licensing rights? I don't think so.

Amazon Prime (at $100/year) will need to generate 1 million new subscribers to cover the costs of this deal. I don't think that'll happen.


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