The weak reception of Amazon’s new “Lord of the Rings: The Rings of Power” series among fans could dent Prime subscriptions, according to DA Davidson. The fantasy television series, which launched last week, could reveal holes in Amazon Prime Video’s content strategy as the tech parent hikes membership subscriptions, partially to offset spending on expensive media franchises and NFL Thursday Night Football, according to analyst Tom Forte. He argued in a Tuesday research report that the “membership cancelation risk is greater than zero.” “A large number of consumers may not be interested in LOTR, may not be happy about the increase in prime membership (to $139 from $119) that reflects the cost of video content (such as LOTR), and, therefore, may be more likely to cancel their memberships,” wrote Forte. Still, the analyst reiterated a buy rating and a $151 price target for Amazon. The tech stock last traded at $126.11. The Lord of the Rings series is the latest legacy franchise series that media companies are hoping will attract viewers to their platform, with HBO last month launching its Game of Thrones prequel “House of the Dragon.” More than 25 million people watched the premiere of “The Rings of Power” series. Amazon reportedly spent roughly $465 million on the first season alone. Still, the Tolkien series itself may not be enough to motivate customers to sign up for Prime, especially as Amazon competes with more traditional media companies such as Disney that boast deeper content libraries. “There are a lot of other popular series on over-the-top (OTT) platforms competing for consumers’ attention. We believe consumers switching services to watch the latest and greatest big-budget shows is an important challenge for the industry right now,” according to a separate note last week from DA Davidson. Meanwhile, the Rings of Power is drawing weaker than expected initial ratings that Forte fears will alienate passionate Tolkien fans “who will express their discontent by not only voicing it on social networks, but also canceling their Prime memberships,” Forte wrote. At the same time, more casual fans of the series may be too unhappy with membership price hikes to keep their subscriptions. “In its 4Q21 earnings press release, Amazon indicated more than 200M Prime members streamed movies and TV shows. Twenty five million viewers would suggest 12.5% penetration. While an impressive figure, in our view, if you look at it from a different perspective, it would suggest 87.5% did not watch the premier, which speaks to our risk to Amazon,” read the note. —CNBC’s Michael Bloom contributed to this report.
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