Amazon's Woody Allen Hiring Underscores Risk in TV Push

Company Recently Posted Its Worst Loss Since 2003

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Amazon's decision to hire director Woody Allen to create a TV series shows the challenges and potential pitfalls that the web retailer faces as it builds its video offerings.

The director, known for Oscar-winning movies such as "Annie Hall" and "Midnight in Paris," has never written a TV series before. Hiring talent at his level is expensive and Amazon, even with the two Golden Globe Awards it won this week for its cross-dressing sitcom "Transparent," hasn't generated a hit along the lines of HBO's "Game of Thrones" or Netflix's "House of Cards."

"TV is not the same as movies, and few writers or directors make the transition well," said Michael Pachter, an analyst at Wedbush Securities in Los Angeles.

Mr. Allen himself joked about the project in a statement yesterday: "I don't know how I got into this. I have no ideas and I'm not sure where to begin. My guess is that Roy Price will regret this," he said, referring to the head of Amazon's studio.

Mr. Allen, 79, will write and direct the untitled half-hour series that has been ordered up for one full season, Amazon said yesterday in a statement. The show will be available to subscribers of Amazon's Prime service, which costs $99 a year for access to a library of digital shows and movies, along with two-day shipping and other perks.

Impatient investors
The deal with Mr. Allen aligns with Amazon CEO Jeff Bezos's strategy of producing original shows and competing with Netflix and HBO, which also have attracted viewers with exclusive content. Investors, though, have grown impatient with Bezos's prioritizing investments in customer satisfaction and growth over turning a profit. Amazon stock has fallen below $300, trading today at $289.93, down from more than $400 a year ago.

Amazon posted a net loss of $437 million in the third quarter, its worst since at least 2003. The results included a $170 million inventory charge largely attributable to the Fire smartphone, a flop that has come to represent one of Amazon's failed bets on a big investment.

In addition to the cost of the video strategy, there's also a risk that some Amazon customers will be offended by Mr. Allen's personal life, which has been marked by controversy over his marriage to Soon-Yi Previn, the adopted daughter of Allen's former wife Mia Farrow, and accusations of child molestation by Dylan Farrow, Mr. Allen and Ms. Farrow's daughter.

A spokeswoman for Mr. Allen, who has denied Dylan Farrow's claims, said the director wasn't available for an interview. A representative for Mia Farrow didn't immediately respond to a request for comment from her and Dylan.

Prime programming
While Amazon doesn't disclose how many of its customers pay for Prime, analysts' estimates range from 20 million to 35 million subscribers.

The Seattle-based company, which started Amazon Studios in November 2010, plans to introduce seven new shows this week, including an hourlong drama from director Ridley Scott that envisions what would happen if the Allies lost World War II and another providing video interpretations of New Yorker magazine stories. In addition, six new shows for kids will be released.

"No matter what you think of Woody Allen, his name is iconic and his brand is iconic, and it's a bold move by Amazon to associate with one of the most iconic filmmakers working today," said Paul Dergarabedian, senior analyst at industry researcher Rentrak Corp. "These are the kind of moves they need to make, coming off the win for 'Transparent,' which immeasurably raised Amazon's profile."

Polling viewers
The studio, based in Santa Monica, Calif., is headed by Mr. Price, the son of former Columbia Pictures chief Frank Price. The company has sought to differentiate itself from traditional TV networks by soliciting scripts online and asking viewers to vote on whether they like the initial episode.

Jack Epps, who teaches TV writing at the University of Southern California in Los Angeles, said that while hiring Allen is a "smart" move from a creative standpoint, it remains to be seen what such shows will bring to Amazon's bottom line.

"The toughest thing about this new media world is monetizing these things," he said. "I don't think anyone really knows how it's going to work financially. There's leaps of faith being made here."

The original programming initiative is aimed at luring more customers to Amazon's library of digital shows and movies, which users must rent or buy even if they aren't Prime subscribers. The shows also bring potential shoppers back to the Web retailer's online storefront.

Amazon Studios is also part of Bezos's push to invest in new areas to diversify the company's businesses and create new income opportunities. In the past year, the CEO has rolled out new TV-streaming devices and a smartphone. Amazon also has more than 1 million customers for Amazon Web Services, a cloud-computing platform used by other companies to store data and run software over the Web.

~ Bloomberg News ~

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