Amazon is one of the largest companies on the planet, employing a total of 1.5 million people around the world.
However, that number has decreased by several hundred this week as Amazon announced that it would be initiating significant layoffs within the Prime and MGM departments. And the press got a hold of the memo explaining exactly why they’ve made this tough decision.
Amazon Laid Off 27,000 Employees Last Year
Amazon is one of the largest employers on the planet, but in 2023, the company laid off an almost unbelievable 27,000 employees.
And there are essentially two reasons why this mass firing occurred. First, Amazon hired far too many people during the pandemic in 2020 and now needs to scale back, and second, even the giant company is being affected by the ever-increasing inflation rates.
Is Amazon In Trouble?
Amazon is currently valued at an almost unbelievable $1.5 trillion, and while its stock rises and falls most days, in general, the share price has been steadily increasing over the past few years.
So many are wondering: If Amazon is doing so well, why are they making huge cuts to their staff?
Giant Companies Are Not Immune to Recession
The truth is that while Amazon is still making billions of dollars every year, it’s not immune to inflation and recession.
In order to stay on top, Amazon needs to tighten its purse strings during this difficult time, and the easiest way to do so is to cut back on staff.
Understanding Amazon’s Many Businesses
As well, while Amazon as a whole is still doing well considering the current economic climate, certain factions within the business aren’t profiting as much as was expected.
The layoffs are occurring within the Prime Video and MGM divisions, which are struggling due to some big financial mistakes. But it’s really Amazon’s entire entertainment division that is in trouble.
Buying MGM Set Amazon Prime Back $8.5 Billion
The first decision that many consider an error in judgment was purchasing MGM Studios for a whopping $8.5 billion in 2022.
Financial experts are now arguing that the recent setbacks Amazon is experiencing are due to issues from the purchase, though Amazon hasn’t responded to those theories directly.
The Most Expensive TV Show Ever Made
Some say that the cutbacks are due at least in part to Prime Video’s decision to spend $465 million on just one season of a television show.
Obviously, Prime Video was hoping that its huge investment in “The Lord of the Rings: The Rings of Power” Season 1 would generate incredible profits, but that is not what happened. While 25 million people watched the first episode, reports say far fewer finished the season.
Senior VP Mike Hopkins Made the Surprising Announcement
But even though Prime Video has faced its share of issues in the past couple of years, it was still surprising to many that they’re making such huge cuts to their staff.
Prime Video’s senior vice president made the announcement through a company-wide memo, and while it doesn’t explain exactly why the decision was made, it does give some insight into the situation. And luckily, it has been leaked to the public.
The Amazon Prime Memo
Mike’s memo starts with positive words for all Prime Video has been able to accomplish in recent years, citing partnerships and the purchase of MGM.
He wrote, “We’ve taken significant steps towards our long-term vision of making Prime Video the first-choice entertainment destination for customers worldwide, and I’m proud of everything we’ve accomplished as a team to date.”
Getting to the Bad News
But then, in the second paragraph, he wrote, “Yet, at the same time, our industry continues to evolve quickly and it’s important that we prioritize our investments for the long-term success of our business while relentlessly focusing on what we know matters most to our customers” (via Variety).
And continued, “Throughout the past year, we’ve looked at nearly every aspect of our business with an eye towards improving our ability to deliver even more breakthrough movies, TV shows, and live sports in a personalized, easy to use entertainment experience for our global customers.”
Assessing the Business
Apparently, within this deep assessment of the business, Amazon noted that they needed to cut costs, though they said so with more assiduous language.
Mike told the world, “As a result, we’ve identified opportunities to reduce or discontinue investments in certain areas while increasing our investment and focus on content and product initiatives that deliver the most impact.”
‘Eliminating Several Hundred Roles’
The memo continues, “We will be eliminating several hundred roles across the Prime Video and Amazon MGM Studios organization,” and that those losing their jobs would receive the notification by the next morning.
Mike also expressed that this was a “difficult decision to make” and that he and his team “do not take [it] lightly.”
Amazon’s Severance Packages
The Amazon memo also noted that all affected employees will receive “a separation payment, transitional benefits as applicable by country, and external job placement support.”
Though the memo didn’t specify exactly what kind of severance package the now-former employees will receive, historically, Amazon has offered 60 days of full pay and benefits, which is considered generous in the corporate world.
The Amazon Memo Specifies the Company’s New Plan
At the end of the now-famous memo, Mike wrote, “Our prioritization of initiatives that we know will move the needle, along with our continued investments in programming, marketing and product, positions our business for an even stronger future.”
Which many have taken to mean that Prime Video will be spending its time, energy, and money on encouraging more sales and improving program technology.
Amazon Prime Video Is Adding an Ad-Supported Option
One change that Prime Video has already made is that, as of Jan. 29, 2024, advertisements will be added to all shows and movies on the streaming site.
That is unless members decide to pay for the ad-free option, which will cost them an additional $2.99 per month. And since there are already 200 million Prime Video members, even if only a fraction of the subscribers opt for the ad-free membership. Prime Video will increase its monthly intake significantly.
Amazon’s Gaming Service Twitch Also Announced Layoffs
While the Prime Video memo went viral, Amazon also announced that there would be more layoffs in another department.
Twitch, Amazon’s video game live streaming service, is about to let go a whopping 500 employees.
Freevee Employees May Be Next
In addition to the layoffs at Twitch and Prime Video, Amazon has also decided to reassign employees who work directly for its streaming service Freevee.
Few details have been released, but it seems that these employees will now be focusing on Prime Video, and there’s even a rumor that Freevee will stop producing content in the near future. Of course, if that happens, Freevee employees may be the next to go.
Why Are Most of the Layoffs Within Amazon’s Entertainment Companies?
From Twitch to MGM, Freevee, and Prime Video, it seems clear that the majority of Amazon employees losing their jobs work in the entertainment business.
The SAG-AFTRA strikes last year certainly played a role in the current dilemma of Amazon’s entertainment departments. Many film and television projects were shut down during the strike, which cost the company money.
The Strike Led to Higher Streaming Bonuses for Actors and Writers
However, it’s really the terms and conditions of the agreement reached last year that will affect Amazon’s streaming sites.
Minimum compensation has increased by 7% for actors and 11% for stand-ins, AI use is now limited, relocation bonuses have been increased, and, most importantly, streaming bonuses have also gone up. All of this means Amazon will have to pay more to produce and stream content.
Amazon Culture Doesn’t Fit the Entertainment Industry
There are also rumors that one of the reasons why Amazon’s entertainment companies aren’t thriving within the industry is that their company culture doesn’t align with Hollywood.
From compensation structure to office organization, Amazon likes to do things differently, and those who have experience working with other entertainment ventures simply don’t like working for Amazon.
Hundreds of Employees Isn’t Really a Lot for Amazon
It’s important to note that while Amazon is certainly making headlines for its struggles, and hundreds of layoffs do seem like a lot, it’s not actually a large percentage of even Prime Video’s current staff.
As mentioned, Amazon employs a total of 1.5 million people, but Prime Video makes up 10,000 of those employees, and MGM another 4,000.
Hopefully, Amazon Has Laid Off Everyone It Needs To
However, these hundred are just the latest in the long list of almost 30,000 people that Amazon laid off over the past year.
And while no one knows what the future holds, many are hopeful that Amazon has finally let go of enough staff to keep itself afloat and that 2024 won’t see nearly as many layoffs as 2023.
Amazon Is Still on Top
While these recent events may make it seem like Amazon is no longer on top, it’s important to understand that the company is still thriving and will likely continue to do so.
However, clearly, the entertainment businesses within the giant company are in a bit of trouble, and it’s likely that more changes will need to be made in the near future.
Amazon Prime Isn’t Going Anywhere
As long as Mike Hopkins and his team don’t spend millions or even billions of more dollars on studios and TV shows that totally flop, Amazon Prime Video and MGM Studios aren’t going anywhere any time soon.
That being said, no one knows what the future holds, and with the layoffs, the new payment requirements with SAG-AFTRA, and Amazon’s seemingly unimpressive understanding of the entertainment industry, that assessment could be wrong.
