Tech • Retailing giant seeks to save money ahead of high-stakes debut.
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Santa Monica, Calif. • Amazon is letting viewers help choose its new lineup of TV shows, scuttling a secretive, wasteful process once reserved for Hollywood taste-makers.
The online retailing giant will let visitors from the U.S, U.K. and Germany watch, rate and critique 14 pilot episodes the company has bankrolled. Viewer comments will help the company decide which shows if any get the green light.
"Why follow the guru method when you don't have to anymore?" says Roy Price, director of Amazon Studios. "The audience is out there and the audience is interested. We might as well make them a partner in the process."
Amazon's foray into TV production is unique in the way it saves money. Every spring, traditional TV networks like ABC, NBC, CBS and Fox order dozens of pilots and show them to focus groups. Executives pick just a handful to make into series. Then, they commission 13 episodes of each promising show, with each one potentially costing a few million dollars. Many episodes won't ever air if the first few don't attract big audiences.
Amazon.com Inc. is riding a wave of Internet-fueled people power that is transforming the entertainment industry. Crowdsourcing, the act of soliciting content and ideas from the online masses, is getting its moment in the spotlight. Online buzz can make or break movies these days. And crowd-funding sites like Kickstarter help generate fans and startup capital before would-be producers start filming.
Amazon is testing the market with shows for children and comedies, each just a half hour long. Going into full production will pay off if enough people sign up to pay $79 a year for Amazon Prime, a service that offers free shipping on Amazon orders, an e-book borrowing service as well as home and mobile access to movies and TV shows.
Under the age-old TV model, any number of things can derail a program's ability to draw an audience in its early days a weak lead-in show, for instance, or competition from a big event like the Major League Baseball playoffs.
Alan Cohen, a producer of the Amazon comedy pilot, "Betas," says Amazon's new way of launching shows could offer show creators some welcome relief from the pressure of network TV.
"We're not just playing that time-slot game," Cohen says. "Here, you have the opportunity to put it out, and it doesn't matter exactly what time it airs. People can find the show and it'll be out there."
As it makes big bets on online video, Amazon is competing with companies such as Netflix Inc. and Hulu. Netflix debuted its big-budget original series "House of Cards" in February to critical acclaim. The company's coming quarterly earnings results, due Monday, will be the first indication of whether its investment helped attract more subscribers.
But Amazon has more to gain from growing Prime members than just paying for TV shows. Once people join Prime, according to Benchmark Co. analyst Daniel Kurnos, they tend to buy 6-8 times more items from Amazon than non-members, in part to take advantage of the free shipping. They also buy digital books and movies on the store that aren't included as freebies.
Amazon doesn't divulge how many Prime members it has, other than to say there are "millions." Kurnos estimates there are between 6 million and 10 million.
"Amazon has always been trying to drive more customers to Prime. Not because Prime itself is profitable, but because it gives you golden handcuffs," Kurnos says.
The company gets a second benefit from Prime because third-party sellers pay fees to be included in the Prime free shipping program, which requires that they send their goods to Amazon warehouses for handling. That keeps the company's facilities humming at fuller capacity, making its deliveries more efficient.
In a sign that the focus on Prime is working, shipping revenue where Prime membership fees are recorded has been growing, up 57 percent in the quarter through December compared with a year ago. That has pushed net shipping costs as a percentage of total revenue down, helping boost profitability.
Amazon has been investing heavily to convince more people to sign up for Prime, and recently paid for the exclusive online rights to a number of shows including the second season of "Downton Abbey" and the CBS show "Under the Dome," which will debut this summer.
The company is taking a creative stab in the TV space, not just a financial one. One of the original pilots, "Betas," is about a high-tech startup that is trying to create the world's greatest social media app, called BRB. The "Betas" shoot took place in a real-life shared workspace for app developers in Santa Monica, Calif., last month. The show treads on familiar ground for the Internet pioneer company Jeff Bezos founded in a Seattle garage two decades ago.
Script memos from Amazon higher-ups tended to focus on how to portray startup culture, rather than on character or plot. Amazon put producers on the phone with real-life venture capitalists, helping writers craft one of the main characters, a financier played by Ed Begley Jr.
"It's little things from that world," said Alan Freedland, another veteran producer overseeing the show. "Guys were saying, 'They wouldn't say they'd email each other.' They said, 'They'd ping each other.' "
And actors are warming to the new reality that Internet companies are wading into what was once exclusive Hollywood territory.
Karan Soni, who plays the straight-laced software programmer in "Betas," said he likes that his work will be seen, something that the traditional TV system doesn't guarantee. That not only helps the 24-year-old's career, it suits the younger generation he's part of.
"What Amazon is doing which I think is really cool is the pilots are actually going to be seen by everyone," Soni says. "They encourage you to watch on your computer and tablet and things, whereas networks don't. So we're not fighting with the people we're sending the content to. That is so cool."