Web giant has had a few minor triumphs, but remains behind rivals such as Netflix, with Disney and Apple also making moves

For a business so keen to emulate Hollywood, Amazon is putting in a matchless performance: it is embroiled in sexual harassment scandals and struggling to engage with audiences.

The reverberations from the Harvey Weinstein furore took centre stage at Amazon Studios last weekend when Jeffrey Tambor, the star of Transparent, one of the unit’s few outright successes, quit as the show’s lead due to allegations of misconduct. Tambor has denied ever deliberately harassing anyone.

It was the second post-Weinstein scandal to hit the studio, after its boss Roy Price quit last month in the wake of harassment allegations.

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Amazon must navigate these losses against a backdrop of below-par performance at its streaming business, where there have been too many multimillion-dollar failures. So a fortnight ago Jeff Bezos, the company’s founder, announced a deal to make Lord of the Rings into a TV series.

The mooted $1bn (£755m) cost – $250m for the rights, $750m to film six series, making it the most expensive TV show ever – illustrates the scale of Amazon’s ambition and Bezos’s growing frustration with the TV business.

“Buying Lord of The Rings is completely against their previous strategy,” said Tom Harrington, an analyst at the media consultancy Enders Analysis. “They are trying to buy their way out of their difficulties.”

Since launching in 2011, Amazon Studios has had minor triumphs such as Transparent and Mozart in the Jungle, but its attempts to create global hits – led by the alternative history epic Man in the High Castle – have failed to match the success of Netflix’s Stranger Things or HBO’s Game of Thrones. The heads of comedy and drama and unscripted programming have left in a shakeup of the unit.

According to unofficial estimates, Amazon spent about $4.5bn on TV and film content last year. Yet it remains behind rivals such as Netflix and HBO in terms of viewers and awards and must contend with Disney and Apple making their own moves in the streaming TV space.

Amazon’s TV strategy is supposed to support a wider strategic objective: get people to buy more stuff. Amazon Studios output is streamed on Amazon Prime Video, available to subscribers to Amazon Prime, which provides perks ranging from same-day and free delivery to access to digital magazines and books.

Prime members are Amazon’s most loyal and biggest-spending customers. The logic behind the Prime Video service is that the allure of its content should help drive membership – with lots of online purchases rolling in as a result. Amazon Prime has about 63 million members, compared with more than 100 million subscribers at Netflix and approximately 130 million at HBO.

“I suspect Amazon Prime Video hasn’t had the uplift they’d wanted in subscribers for the money invested,” said one senior TV executive. “They have spent a lot of money but where is their Stranger Things or The Crown? That has been a fundamental issue.

“The content business is only a small part of what they do and so I’m not sure they have really been committed to it. And on top of that they recruited people who didn’t have a particularly good track record in TV content production and commissioning.”

There has been a cull of expensive shows that have not looked like turning into big international hits, such as the Christina Ricci-led period drama Z: The Beginning of Everything, about Zelda Fitzgerald, which was abruptly cancelled after being confirmed for a second season, and The Last Tycoon, starring Frasier’s Kelsey Grammar.

“The history of entertainment is that not every show is going to perform equally,” said Jay Marine, the European chief of Amazon Prime Video. “Prime Video is working but as always we want to get better and better and have a portfolio of shows. We always want shows to do bigger and better.”

Amazon maintains that the TV and film service is one of the biggest draws of Amazon Prime and remains integral to its global strategy. Shows such as The Grand Tour, from the former Top Gear team, have proved successful investments.

“We look for things to bring people in that they care a lot about,” said Marine, who has confirmed a £50m deal for exclusive UK rights to the ATP Tennis tour previously held by Sky. “People renew their [Amazon Prime] membership at a higher rate if they take Prime Video. And those on free trials convert to paid membership at a higher rate if they are Prime Video watchers. We love the value and it is working.”

Some industry watchers believe Amazon’s huge outlay on Lord of the Rings will not pay off. It nevertheless represents the latest example of the increasingly astronomical value media companies are putting on franchises that can guarantee hits.

Days before Amazon’s announcement, Disney – which has made billions out of its shrewd acquisitions of Marvel, Pixar and Star Wars producer Lucasfilm – announced a trilogy of new Star Wars films and a TV series. Disney has also pulled its content from Netflix and is launching its own streaming service.

Then comes Apple, with the deepest pockets of all, which has poached a string of top talent to invigorate its own TV and film ambitions. Apple’s hires include Jamie Erlicht and Zack Van Amburg from Sony Pictures Television, the maker of Breaking Bad and co-producer of The Crown, as worldwide video chiefs, and Jay Hunt, who oversaw Channel 4’s £75m poaching of Great British Bake Off from the BBC, as creative chief of Europe.

“It is impossible to write off Amazon because its business is so multi-faceted,” said a second senior TV and film industry executive. “Amazon’s business model is different from other streaming services. The Tolkien deal dwarfs anything in the realms of what Netflix would ever be able to spend on a single franchise.

“I think Amazon will overtake Netflix on numbers – a creep rather than a revolution – and Disney has the brands and is making moves. Apple is the one that hasn’t really figured out what it is yet. What I wonder is: if Lord of the Rings is worth up to $250m just for the global rights, could Harry Potter be the first $1bn TV rights buy?”

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