×

Amazon just quietly showed how ambitious is it with media

Amazon is now consistently profitable — and that means a lot more money is going toward the video-streaming battle with Netflix.

Amazon will double its video content spend in the second half of this year, and triple its spending on original content, the company said this week.

The announcement was slipped into the company's better-than-expected second-quarter earnings, where chief financial officer Brian Olsavsky said Amazon was "very happy" with free trial conversions and renewal rates on Amazon Video, the company's $8.99 standalone streaming offering.

"We know the customers love it," Olsavsky said on an earnings call. Critics, apparently, do too — Amazon Studios received 16 Emmy nominations for Original Series.

Jeff Bezos
Getty Images
Jeff Bezos

The company declined on the call to give a particular figure for its video content spending, saying only that they've continued to add content since the $1.3 billion the company spent in 2014. Canaccord analyst Michael Graham estimates that 20 to 25 percent of that was on original programming.

It's unclear how that stacks up with Netflix's promised $6 billion cash outlay on content in 2016, but Graham estimates that Netflix has about 14,000 movies and TV series and Amazon has about 13,000. As for original programming, Canaccord says Amazon has about 25 titles compared to Netflix's 100 originals.

Either way, both companies have been throwing "unending bales of money" at the content wars, Andy Cohen, executive producer of Bravo's "Real Housewives," told CNBC.

To be sure, Netflix is far-and-away the most popular streaming service, with 45 percent of all U.S. TV households holding a subscription, according to Nielsen. Twenty-two percent have Amazon Prime, Nielsen said.

But there are signs that Amazon is already gaining ground.

"We are confident that once it announced a standalone service, Amazon declared war on Netflix, and intends to back up its new offering with a branding strategy of its own," Wedbush analyst Michael Pachter wrote in April after the announcement of Prime Video. He had an "underperform" rating on the stock (the average rating in FactSet is overweight).

The e-commerce company snatched an exclusive deal for PBS's children's shows, many of which had been on Netflix and Hulu.

Amazon's Prime service in India will have local content and also Amazon Originals, Olsavsky said. That's after Netflix in June announced a new original series shot in India in Hindi and English.

Netflix announced in its latest quarterly earnings that it added 1.7 million subscribers, far lower than expectations. Amazon did not specifically disclose its Prime subscribers, which have access to its video content, but Ben Schachter of Macquarie Research estimates Prime is in upwards of 30 percent of U.S. households.

"We think you see both massive investments as well as massive profits," Schachter said of Amazon on CNBC's "Squawk on the Street" on Friday. "More and more people are using the internet more and more often."

Disclosure: Comcast, which owns CNBC parent NBCUniversal, is a co-owner of Hulu.