Streaming Services Go Big with "Lord of the Rings" Revival, Despite High Costs
Amazon's "Lord of the Rings" series is breaking budget records, but with good reason. The fantasy epic, set thousands of years before the events of J.R.R. Tolkien's original trilogy, became the most expensive TV show ever made, with a reported budget of $465 million for the first season alone. Despite such a steep price tag, streaming giants like Netflix, Disney, and Amazon are investing more in content, rethinking their strategies, and looking for profitable streaming futures.
A High-Risk, High-Reward Investment
Streaming services now face the challenge of weighing the costs against potential rewards. With rising expenses and a need to deliver high-quality content, companies like Netflix, Disney, and Warner Bros. Discovery (CNN's parent company) are carefully considering their investment strategies.
"2022 is a pivotal year for streaming," said Andrew Hare, Senior Vice President of Research at Magid. "Major players are generally increasing their content expenses in hopes of driving further growth." But, he wondered, have we reached a plateau, or will Amazon's audacious bet backfire when competitors start pulling back?
Amazon, as a diversified billion-dollar company, can afford such an investment. However, the high cost of producing a series filled with hobbits, elves, and magic might become easier to stomach for traditional media companies, who could ramp up their own efforts to compete as streaming numbers account for part of their overall performance.
A Long Road to Production
"The Lord of the Rings" series has been in development since 2017, and even if Amazon decided to retract its investment, it would not be able to retreat now. This long history is typical for high-budget productions, and despite the risks, the rewards can be worth it.
Finding the Right Balance
The success of the series will depend on overall strategy, market positioning, and how the investment fits within Amazon's broader portfolio. For Hare, streaming is a unique, competitive space, and the various players have different visions and goals.
Impact on Traditional Media Companies
Amazon's high production costs and ambitious investment in "The Lord of the Rings" series reveal critical strategies emerging in the streaming world. Here are a few key takeaways:
- Invest in Established IP: IP-driven shows like "The Lord of the Rings" and "Game of Thrones" are often expensive but help attract and retain viewers, contributing to the overall value of a streaming service.
- Focus on Quality Content: While it's expensive, high-quality content helps engage viewers, which is crucial for long-term profitability.
- Explore Partnerships: Collaborate with studios, authors, and IP owners to create compelling content and reduce risk.
- Adapt to New Revenue Streams: Streaming services with successful IP-driven shows can leverage their popularity for merchandising, subscription services, and other revenue sources.
In this new era of content creation, traditional media companies must adapt, find new revenue streams, and focus on delivering a captivating viewing experience to keep up with competitors like Amazon.
