The next act in Amazon’s video business

Hi friends. This is Jason Del Rey, Fortune’s new tech correspondent.

I’ve spent much of the past decade reporting on Amazon and its successes, failures, opportunities, and flaws—both at the online tech publication Recode (RIP) as well as in my new book, Winner Sells All.

Even so, at various points over that time, I’ve struggled to understand the rationale behind some of the company’s big bets. One of those has been Amazon’s ambitious, and incredibly expensive, investments aimed at becoming a major player in the TV and movie streaming business.

When Amazon first introduced Prime Video in 2011, the content library was so uninspiring that Jeff Bezos decided to give it away as part of the Prime shipping program.

“I remember Jeff used those exact words—it’s an ‘Oh, by the way,’ former Amazon video executive Bill Carr told me years ago. “‘Yeah, Prime is $79 a year. Oh, by the way, there’s free movies and TV shows with it.’ And how much could consumers complain about the quality of movies and TV shows if it’s free?”

But over time, Amazon has become one of the most aggressive spenders in the entertainment industry, to the tune of tens of billions of dollars. While company executives have long argued that Prime’s video business helps the company’s retail engine sell more stuff, Amazon’s own employees have sometimes had their doubts.

As the tech journalist Brad Stone wrote in his 2021 book Amazon Unbound, Amazon video employees he spoke to found “little evidence of a connection between viewing and purchasing behavior—especially one that justified the enormous outlay on video.”

The truth, Stone wrote, was that Amazon was making TV shows and films because “Bezos wanted Amazon to make TV shows and films.”

So what would happen after Bezos announced in February 2021 that he was handing over the CEO role to the longtime head of AWS, Andy Jassy? Well, the video bets kept coming. Shortly after Bezos announced his successor, Amazon announced that it had acquired the rights to Thursday Night Football, in a deal running through 2032 that is reportedly costing around $1 billion per year. A year later, the tech giant acquired MGM for $8.5 billion in its second-largest acquisition ever.

But there are also signs that Amazon’s video initiatives under Jassy may come with a bit more attention paid to the bottom line. Earlier this month, Amazon cut hundreds of corporate jobs across its streaming and studio businesses. And in a major change, Amazon Prime Video movies and TV shows will begin including ads on Jan. 29 unless customers pay an extra $2.99 a month for an ad-free tier.

At the same time, the company is also making moves to acquire the rights to more live sports, agreeing to invest more than $100 million in a regional sports network that could give the tech giant streaming rights to more than three dozen teams across Major League Baseball, the National Hockey League, and the National Basketball Association. Live sports are an area of the video business sources say Jassy is especially keen on and one that the company hopes will attract more lucrative TV ad dollars as it’s one of the last bastions of appointment viewing. Amazon’s $40 billion ad business is already one of the most profitable segments of the company.

So it shouldn’t be a surprise that when Fortune CEO Alan Murray asked Jassy in a recent interview to name the company initiatives he’s most excited about, the Amazon CEO started with this one:

“I’m very bullish on what we’re doing with Prime Video.”

Next week, Amazon announces its financial results for the holiday quarter, and a lot of attention will be aimed at the tech giant’s core retail business and what executives say about the current behavior of the average American consumer. But I’ll also be very curious to watch for any signs of where Jassy and Amazon are taking this very expensive, onetime side hobby, next.

Jason Del Rey

Want to send thoughts or suggestions to Data Sheet? Drop a line here.

This story was originally featured on Fortune.com