The Game of Thrones: A Fascinating Battle Between Old and New Hollywood
Two days ago Warner Bros Discovery #WBD released the House of the Dragon, a spin-off of the Game of Thrones with a budget of over 150 million U.S. dollars.
On September 2, The Lord of the Rings shall premiere on Amazon #AMZN Prime Video exclusively in more than 240 countries and territories worldwide in 33 languages.
1. An ambitious prequel to the Lord of the Rings was received quite skeptically, even though the show is known to have a truly astronomical budget and will become the most expensive television series in history. The budget of season 1 consisting of 8 episodes is worth a whopping 465 million U.S. dollars. This means that the cost of one episode totals about $58 million. It effortlessly beats the price tag of Stranger Things with about $30 million per episode or Marvel with approximately $25 million per episode or The Game of Thrones with about $100 million per season.
2. A practically simultaneous release of these two creates an epic rating battle where Hollywood veterans are trying to keep up with the streaming newcomers. The legendary Warner Bros #WBD and Disney #DIS will have their 100th-anniversary celebrations in 2023, while Amazon #AMZN started producing its original video content only five years ago. As the streaming battles intensify, each of the parties involves believes that it has an undoubtful advantage. Notably, #AMZN cashes on e-commerce and cloud computing, whereas #DIS invests heavily in theme parks earning record-high returns.
3. Streaming services are evidently gaining steam. It’s an absolute nightmare for those who are fully dependent on the streaming business only. For instance, Netflix #NFLX has been stuck at 220 million subscribers. Meanwhile, Disney beat it according to the latest report. And while we can find fault with the figures in the grand scheme of things, the undeniable fact is that the streaming old-timers are butting heads quite fiercely.
4. The classical media formats. The movie theatres whose global box office revenues dropped 80% in 2020 are already open. That being said, the revenues are uneven. Cineworld, the world’s second-biggest movie theater chain with debts totaling £4 bln is getting ready for bankruptcy. А Paramount #PARA which held up the release of Top Gun: Maverick during covid has made a whooping revenue of over $1 bln. Warner returned to exclusive movie screening again.
5. Cash generation. The newbies have no problem with that. The cash flow from operations of #AMZN has dropped yet still totals $35.6 bln (TTM). The money is not running out. And while the majority of subscribers will definitely watch the show and there will be more viewers in general than those of WOTs, Amazon will consider it a success and produce 5 seasons as advertised. Aside from the Lord of the Rings, Amazon has recently purchased Metro Goldwyn Mayer for $8.5 bln and acquired rights to NFL worth $1 bln a year. According to Morgan Stanley’s estimates #MS, this year #AMZN will spend $16 bln on media content the bigger portion of which includes video. This is more than #NFLX has with $14 bln. Next year, #AMZN expenses may hit the $20 bln mark. This is why some of the Hollywood old-timers partner up with newcomers. This month, Paramount has announced the deal with Walmart #WMT whereby Walmart+ subscribers will gain free access to Paramount+ streaming service.
And last but not least,
I believe Amazon is in the search of a series that will place it on par with HBO Max, Disney, and Netflix. Especially if you don’t think about it from the standpoint of expenses and revenues but in the context of share growth, brand expansion, and a possibility to see the product and attract new subscribers.
Prime is a particularly prominent case where the process matters only to expand the brand and increase the shares/subscribers as 90% of people who subscribe to Prime, do that for the sake of delivery benefits and not because of the media content. Amazon knows that IP megahit inspired by SW, Marvel, GoT, and the likes will do more for its brand than just creating a flourishing show. That’s why they are willing to spend a ton of money on this show.
Will all of it be worth it in the end? If the Lord of the Rings on Prime is a very expensive but deliberate advertisement of the Amazon brand, it will.