Why is Amazon laying off hundreds of employees in Prime Video and MGM Studios?

Several hundred employees are losing their jobs in the streaming space at both Amazon Prime and Twitch.

In an internal note, Amazon said it would be sacking 500 employees, about 35% of its workforce. The reasoning given was that the company needed to be “rightsized” and that it had been “too large on optimism” according to Twitch’s chief executive Dan Clancy. Amazon had already cut 27,000 staff in 2023, despite record revenue of more than half a trillion dollars.

“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,” Mike Hopkins, senior vice-president of Prime Video and Amazon MGM Studios, told employees.

Amazon Prime is also set to become an advertised service on the basic subscription in the coming months; the extra payment will be $2.99.

Streaming sites under more pressure than ever

After years of unfettered spending, the economic reality of expensive borrowing means investment has been reduced. In response, companies have raised subscription prices despite the likely effect of reduced suscribers. Only Netflix has reached any sort of profitability mainly because it has been in the market far longer.

“The era of ‘streamflation’ is here,” says Scott Purdy, US national media industry leader for professional services firm KPMG.

Seven streaming plans increased in price during October 2023 alone. Apple TV+ increased to $9.99 per month while Max, formerly known as HBO Max, increased the monthly rate for its ad-free tier from $14.99 to $15.99. In October 2023, Disney+ upped the price of its ad-free tier from $10.99 to $13.99 per month, while Paramount Plus with Showtime announced a price increase from $9.99 to $11.99.