Amazon is laying off "several hundred" employees at its streaming and MGM studios units, a move that arrives weeks before the company ramps up a big advertising initiative for its popular Prime Video service.

The headcount reduction also comes as Amazon's streaming and studios divisions look to reduce spending in some areas and concentrate spending on others, though the overall strategy and specific adjustments the company is undertaking are somewhat vague.

"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, said in a widely reported communication to employees. "As a result of these decisions, we will be eliminating several hundred roles across the Prime Video and Amazon MGM Studios organization."

Amazon, which cut north of 27,000 jobs in 2023, is also laying off more than 500 people at Twitch, as the livestreaming unit that Amazon acquired in 2014 attempts to "right-size our company," Twitch CEO Dan Clancy told employees this week.

Hopkins, meanwhile, told employees that the company's Prime Video and Amazon MGM Studios organization will now look to "prioritize our investments for the long-term success of our business." Amazon closed its $8.45 billion deal for MGM in 2022.

The job cuts enter the picture as Amazon prepares to insert "limited" ads into the baseline Prime Video service, promising an ad load that is lighter than traditional TV and some ad-supported streaming services.

Amazon Prime subs have the option to pay an additional $3 to continue to get an ad-free experience for movies and TV shows. Amazon already runs ads in its Thursday Night Football package and has ready access to a digital ad platform that's being used today for Freevee, Amazon's recently rebranded free, ad-supported streaming television (FAST) service.

Amazon's decision with Prime Video, which has tens of millions of subscribers, stands to instantly turn the company into an advertising juggernaut in the streaming world and put even more pressure on the traditional TV advertising sector.

Following an initial launch in the US, UK, Germany and Canada, Amazon is expected to bring its new ad-based model to Amazon Prime in France, Italy, Spain, Mexico and Australia later this year.

Amazon gains ad momentum with Thursday Night Football

LightShed Partners analyst Richard Greenfield expects Amazon Prime Video's ad business to exceed $2 billion in its first year. "The shift of dollars from linear TV to Prime Video will start in 2024 and become excruciatingly painful in 2025 and beyond," he explained in this blog post.

Greenfield also noted that total viewership of Prime Video's Thursday Night Football coverage rose 24% this year, "illustrating the growing advertising engagement opportunity on Prime, even before the broader ad rollout later this month."

At a streaming-focused panel at this week's CES 2024 in Las Vegas, Amy McDevitt, the sports brand partnership lead for Amazon, talked up the company's success with TNF, which just wrapped up year two of an eleven-year deal.

She said 50% of advertisers in year two were new to the program, and 20% were net new to NFL game advertising.

Thursday Night Football, McDevitt added, creates a "big moment" each week and has served as an entry point for non-NFL advertisers to come in and test the waters.