Amazon's latest video deal puts a crack 'in Netflix's armour'

Jeremy ClarksonREUTERS/Action ImagesTop Gear host Jeremy Clarkson

Fans of the British car show “Top Gear” rejoiced earlier this week when news broke that its three hosts have a new TV show on way after inking a deal with Amazon, which plans to let members of its Prime shopping club stream for free.

Amazon reportedly paid a whopping $US250 million for three years of global rights on the new series, winning the show despite competition from ITV and Netflix.

That’s about $US7 million per episode, but analysts are calling it a big win for the ecommerce company.

“That Amazon was able to win the series away from Netflix, despite Netflix’s larger global distribution base, indicates that a competitor with large enough pockets can put a chink in Netflix’s armour when it comes to acquiring original content,” analysts from Bank of America write in a note Friday morning.

Amazon has been seriously investing in digital content for several years, as it tries to boost the appeal of Prime. After all, it’s Amazon’s bread-and-butter: Members may spend more than double on the site per year than non-members do, according to an analysis from Consumer Intelligence Research Partners in January.

Its original show “Transparent” won a Golden Globe earlier this year, making Amazon the first streaming site to score the “best TV series” honour. CEO Jeff Bezos put it frankly: Amazon’s also the first company to use a Golden Globe to sell toilet paper.

The company is clearly betting big that the new Top Gear-esque show could make its $US99-a-year shopping club more attractive.

Top Gear was the world’s most popular TV program, with over 350 million viewers, and the global distribution rights mean Amazon will be able to stream the series in any region and licence the show for broadcast even where Prime isn’t available.

As a price comparison to the $US7 million-per-show price tag, Netflix reportedly paid about $US100 million for two seasons of “House of Cards” — $US4 million per episode — and about $US9 million per episode for the show “Marco Polo.”

Netflix was actually the frontrunner for snatching up the Top Gear trio, with The Daily Mirror reporting in early June that the company was “very close” to signing a deal.

To BAML, Amazon’s surprise win shows that “although Netflix has been the undisputed champ of streaming originals, they are not invincible.”

Not that it will see any short-term effect on its business. Netflix is still generally seen as having a better selection than Amazon Prime and while Amazon preps the new Top Gear show for release next year, it will likely continue to build its own original content base.

Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.

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