Amazon Studios director Roy Price explains why certain shows succeed, whether to launch every episode of a show at the same time, how much a good show costs, and the difference between good TV then and now.
FORTUNE — Two years ago, Amazon AMZN started developing television content. In the past year, the company produced 24 pilots, which, according to Amazon Studios director Roy Price, is more than a typical broadcast network will prepare for primetime in a year.
Four of the five comedy and drama shows that Amazon debuted on Feb. 6 will be made into a series. They include Transparent, a dark comedy about an L.A. family with a father who is transitioning genders; Mozart in the Jungle, a comedy set amid the dramas of life in a New York orchestra; The After, a sci-fi drama from the creator of the X-Files; and Bosch, a drama based on books by the detective novelist Michael Connelly. Alpha House, released last year, will get a second season.
Fortune spoke with Price on May 13 at Wired‘s BizCon in New York about how to make good TV and why it makes sense for Amazon.
Fortune: You are in Seattle. Where is your team?
Price: They’re in L.A. If you want to make TV shows, you gotta go to L.A. I have MVP Gold status on Alaska [Airlines]. I’ll move back to L.A. — I’m from there — in August.
You moved to Seattle nine years ago to join Amazon. What were you tasked with doing then?
I came to start the digital video store, at the time the DVD store. The question was, how are we going to approach the digital side of the video business. Those were the days when, I can remember one studio head saying to me, “You know, I can tell you one thing: No one is ever going to download one of our movies.” And you know, eight months later you have a deal with them, but it was a period of transition.
Right now, everyone is jumping into professionally produced content. Yahoo announced some things this year. So did Glam Media. There’s so much television — is there a limit?
I suspect some people will fail outright, but a a lot of people will find something that is distinctive and worth saying and has an audience. There’s a lot of creativity out there. I think the question is whether you’ll have enough people getting passionate about the show to make it work from a business model point of view. It depends on what your business model is — subscription versus advertising. I have no doubt we’ll see a lot of experimentation and artistic success, and then we’ll figure out the business side.
So it’s a good time to be a creative in television?
Absolutely. There’s great demand for high quality work. And for original, distinctive ideas. The kind of idea that would have been super challenging ten years ago is now perhaps merely challenging to get going. Anything is challenging, but there’s an appetite.
How does the business model for original programming work for Amazon?
Our business model is fairly straightforward because we have a subscription service so the goal of our program is simply to attract people to Amazon Prime. You’ve got a full subscription video service with movies and TV shows and then by the way, we’ll give you free two-day shipping on the world’s biggest Internet retailer for free.
How much does one of these series cost to produce?
We don’t go into the budget per episode, but the cost of the series is the same as the cost of a series at any one of these places.
So when Netflix NFLX reveals its spending more than $2.5 million per episode on House of Cards, you are spending about the same?
You know, I think House of Cards may be higher than average because they have [actor] Kevin Spacey and [director] David Fincher. I suspect that Orange is the New Black and The Good Wife and Bosch and The Americans are all in the same basket. Whatever premium cable broadcast budget is, that’s a safe range for us.
How many shows does Amazon Studios currently have in production?
We have five children’s shows and five adult shows. So we have 10 shows in production and then we have pilots. We just shot a pilot with Whit Stillman in Paris called The Cosmopolitans. That’s a half hour. We also just shot a fabulous pilot called Hand of God starring Ron Perlman and Dana Delany and directed by Marc Forrester, who did World War Z and Monster’s Ball. And we’ll have more pilots after that.
Would you say this is a significant investment for Amazon?
We’ve put out 24 pilots in the last year, which is more than a typical broadcast network will do per year for prime time for sure. We’re busy because we don’t have a slate, a lineup. Maybe in a few years we can pull it back a little bit.
Why does this make sense for Amazon?
Because it’s all about providing value for customers, making the service feel unique and distinctive, and having a relationship with customers where they are coming back . . . Part of the purpose of original content is to get people to really engage with the service.
So Amazon crowdsources its shows. What do you want to tweak about that process?
I want to tweak nothing about that process! It allows us to be a lot more experimental. Kudos to everyone who has a success ordering straight to series, but I would think that if you were going to order everything straight to series, it probably constrains you a little bit in terms of who you are realistically going to work with. You’d probably have a shorter list.
What you really want in the on-demand environment, which is different than the broadcast environment, is you need to find people who really like the show enough to seek it out. You need to really want to watch the show in modern TV. It’s not about changing the channel anywhere, or just seeing what’s on. It’s not good enough to be good-ish.
We can do a better job getting insight into whether there’s a pocket of people who are really interested in the show. Awhile ago you had to focus more on breadth of enthusiasm rather than depth of enthusiasm. That means a show like Transparent really works in this environment. There are shows in the past that were not as distinctive but universally palatable that would have been valuable, but today for us would not be valuable.
How big are your audiences?
Well, we don’t disclose, but we see that often our shows are the top shows on the service right after they’re released. You see Alpha House go to number one for awhile, and that means it is playing a meaningful role for the service as a whole.
Well we’ll see a couple more pilots, and then in the fall these series will premier. And then there’ll be a new round of pilots. So far we haven’t released our shows all at the same time [like Netflix has done], but we might want to try it. It’s complicated because you can’t really test it. There is some enthusiasm in the press and with customers for doing it all at once, so we’re going to take a look at it before we debut our shows this fall.
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