Company / division: Prime
In the wake of the many allegations against Hollywood producer Harvey Weinstein, allegations of sexual harassment by Amazon Studios boss Roy Price have resurfaced, and have led to his suspension by the company. As with the Weinstein allegations, it appears those against Price have circulated for some time but never been talked about publicly much, though The Information did have a story a little while ago about the specific accusation that’s been reported again this week. Price has already been somewhat embattled recently as Jeff Bezos has begun overruling some of his decisions as head of Amazon’s original content efforts, so it’s possible that he will be forced out over these allegations whether or not others emerge as a way to clean the slate and complete the shift towards the new programming strategy. Needless to say, as with Weinstein, if the allegations are proven to have merit, Price ought to go for those reasons alone.
Update: BuzzFeed has a copy of the internal memo sent to Amazon staff about the suspension and related issues. Something I should have mentioned earlier but neglected to: Amazon was made aware of the allegations some time ago and instigated an independent investigation, which ended without any apparent action against Roy Price. That he’s been suspended now appears to be entirely the result of the public attention this is now receiving rather than any new information that’s come to light. That feels like hypocrisy, a sense exacerbated by the references to Amazon’s policy on abuse in the internal memo.
Amazon has just announced a way for teenagers to buy items from its site through parent accounts, with either an item-by-item approval process or pre-set spending limits. Parents will receive summary text notifications when their teens have placed an order and have the option to reply with a simple “Y” via SMS to approve the order, or to see full details on Amazon’s site. This feels like yet another example of both Amazon’s maturity in the e-commerce space and the way it continues to evolve its offerings even as other retailers continue to play catchup on its core services, and of its need to continually expand its addressable market for its e-commerce services to new potential customers. We’ve already seen this with its attempts to serve cash-centric customers, and we’re now seeing it with this move into serving teenagers more directly rather than through their parents. This will, of course, also train those teens to buy from Amazon from an early age, bypassing other potential sites, while leveraging the benefits of Prime. Feels pretty smart all around.
Bloomberg reports that Amazon is making yet another shift deeper into the logistics value chain, specifically with regard to third party sellers. It will now look to take control of the delivery process for items stored at sellers’ facilities as well as its own warehouses in a program it calls Seller Flex. That doesn’t necessarily mean it’ll make those deliveries itself – it may well still use UPS and FedEx – but sellers will no longer be responsible for making those decisions; Amazon will. Amazon has slowly been taking over more control of seller shipping in recent months, including changes that sellers haven’t liked, though this one seems likely to be somewhat more neutral in its impact. UPS and FedEx share prices have both taken a knock, since they might end up being squeezed out of some functions here, but the immediate impact seems likely to be fairly subtle, given that Amazon simply doesn’t have its own matching infrastructure yet for may of the deliveries those companies make.
Amazon streamed the first of its Thursday Night Football games last night, and this Mashable piece does a good job summarizing the experience for fans (I had other commitments and only tuned in very briefly). It appears the stream mostly held up bar some audio hitches, which hasn’t always been the case for new streaming video services in their debuts but should be par for the course with a provider like Amazon that already has massive streaming scale. The most noteworthy thing about the broadcast is how little innovation Amazon built around it, with the only meaningful departure from a normal broadcast being an alternative audio feed with British commentators providing color for those more familiar with a version of football where people actually use their feet. Twitter, of course, had the rights last year, and at least tried to pair the video feed with relevant tweets, an integration that offered little value at the time, but one on which Twitter has iterated since with more recent live events. By contrast, there was seemingly nothing about last night’s broadcast which felt uniquely Amazon-like, while the ads suffered from the same problem as most streaming video: too much repetition. I’m hoping Amazon was playing things reasonably safe with its first broadcast and will do more interesting things later in the season, because at this rate the NFL might as well just license the streaming rights to traditional broadcasters too.
NBC News reports that Amazon has been talking to traditional TV companies about taking some of their lower-profile networks off their hands. Four specific examples cited in the article linked below are VH1 and CMT at Viacom and Adult Swim and Boomerang at Turner. Big TV companies have been shutting down cable networks over the last few years and focusing their efforts on a smaller number of successful channels with big audiences as cord cutting begins to really bite, so there are potentially quite a few channels with smaller audiences out there for the taking, and NBC says Amazon might buy “scores” of them, though that number might be a bit of a stretch. At any rate, the question becomes what Amazon would do with them, and the obvious answer is either bundling them into Prime or selling them as add-ons to Prime. But another really interesting angle to think about is advertising, where Amazon has been quietly building a big online business but with very little action so far on the video side. Owning lots of linear channels would allow it to build a much bigger video ad business as a complement to its online ad business, and potentially do cross-platform targeting across them. It’s also a fascinating alternative to spending ever more to commission and/or acquire original content for its streaming service – it could probably snap up some of these channels pretty cheaply and run them for less than it would cost to build up equivalent amounts of original content from scratch. Importantly, some of these networks have small audiences but lots of distribution – VH1 is in well over 80 million homes, for example. That would be pretty good relative to Amazon’s own domestic distribution through Prime.
via NBC News
★ Amazon Reports Strong Growth, Much Smaller Margins in Q2 (Jul 27, 2017)
Amazon Uses Singapore as Beachhead for SE Asian Expansion (Jul 26, 2017)
TechCrunch reports that Amazon is launching in Singapore as the first step in an expansion into South East Asia, and other publications have reported that the Prime Now app is live in Singapore. Singapore is a great starting point for Amazon in the region, with high GDP per capita, a small and densely populated area, and proximity to other markets such as Malaysia, Indonesia, Thailand, and so on. As such, a successful launch there could easily serve as a beachhead for expansion into the rest of the region. After a couple of years of higher profits, Amazon appears to be upping investment in growth again in recent quarters, and its international expansion has been a big part of that push, with an acquisition in the Middle East, early moves in Australia, and now this launch. The context for all this, though, is that Amazon is still active in only relatively few countries with its full set of offerings including Prime. Only thirteen countries were included on Amazon’s list of top selling items on its recent Prime Day, and 92% of its global revenues come from just four countries: the US, Germany, Japan, and the UK. That’s easy for those of us in the US to forget, but Amazon is still far from ubiquitous globally and major players dominate e-commerce in several important markets. In Singapore and the rest of SEA, Amazon faces some existing strong competitors backed by some of those larger players from Asia, including Alibaba, so it’s going to be far guaranteed that it enjoys US- or UK-level dominance. But brand awareness seems to be high in the region already and it has a decent shot at establishing a good business in Singapore and beyond.
New research Consumer Intelligence Research Partners (CIRP) suggests that Amazon has 85 million Prime subscribers in the US, based on a recent survey. That number feels quite a bit too high to me – my analysis of Amazon’s year-end 2016 financials suggested a number closer to 70 million globally, which of course includes at least a few million subscribers in other countries. A survey I did a year ago suggested that a majority (over 60%) of households in the US didn’t have Prime, so it would be a massive turnaround in just a year for a similar percentage to have a Prime subscription. So I take the overall number with a pinch of salt while acknowledging that the directional stuff is correct. One interesting secondary data point is that 28% of Prime households are using the newer monthly subscription option rather than the annual option – that also feels a little high, but it’s indicative that people are drawn to the benefits of that option, including the smaller one-time outlay, the flexibility of a month-to-month subscription, and the familiarity of that model.
Amazon has begun offering a discounted monthly Prime subscription for low income households. Specifically, it will offer those who receive food stamps a $5.99 per month option, compared to the standard $10.99 per month or $99 per year options. In a survey I did just over a year ago, it was very clear that lower income households were far less able to benefit from the subscription explosion and services like Prime than their wealthier counterparts – the chart linked here gives the summary of penetration of Prime by income, and the article here explains the rest of the detail, though it’s behind the Techpinions paywall. The reality is that it’s tough for households with low or unpredictable incomes to commit to annual subscriptions and even monthly subscriptions, so lowering the cost of the monthly option will make it more palatable while giving customers the flexibility to start and stop their subscriptions on a monthly basis. The WSJ article here focuses on Walmart as the target here, and that’s obviously a reasonable angle given Walmart’s success with lower-income shoppers, but this is really about expanding the addressable market for Prime, regardless of who’s currently capturing those customers. The Prime “flywheel” continues to be Amazon’s strongest competitive weapon, and bringing more households and the people who live in them into the base of Prime subscribers will continue to benefit Amazon enormously.