The age of Amazon
Movies, TV series, music, books, tablets. (And, um, groceries.) How big will the megaretailer's media dominance get?
With all the hoopla over Apple‘s iPad mini, Google‘s Android update, and Facebook‘s stock price, it may be that many of us didn’t notice Amazon muscling its way to the top realms of tech — along with just about everything else.
Amazon is by far the world’s largest online retailer, but for it to emerge as a digital media powerhouse would be no small feat. The company already sells millions of physical items as varied as coffee and vacuum cleaners, and it’s assembled a potent portfolio of e-businesses: from audiobook seller Audible to IMDb, to DVD and game rental service LOVEFiLm, to fashion e-tailers like Shopbop and Zappos. While introducing the new Kindle Fire HD and Paperwhite on Sept. 6, CEO Jeff Bezos said, ”We want to make money when people use our devices, not buy our devices.” This is clever marketing, but it also reveals its ultimate strategy. Amazon has created a soup-to-nuts system unlike any other: a cheap tablet that is a near-perfect portal for buying and consuming the company’s extensive catalog of digital as well as physical products. While not all of its efforts have been successful (Amazon declined offers to comment), its ambition continues to be downright mind-boggling. Here’s a look at some of the main ventures.
The company is reticent about releasing sales figures, but Amazon’s Kindle Fire tablets are reputed to be at or near the top of the Android heap. (A new 8.9-inch version will go on sale Nov. 20.) To capture a slice of the lucrative apps market, Amazon launched its own store to rival Google Play. And the company recently signed a deal to stream movies from Paramount, Lionsgate, and MGM, horning in on a prized former Netflix exclusive. It now has a catalog of more than 100,000 films and TV shows that can be streamed or downloaded, many for free to subscribers of Amazon Prime (a bargain at $79 a year, or now $8 monthly). ”Amazon successfully migrated from being a strong online retailer of books, CDs, and DVDs to one that has created digital services for e-books and MP3s as well as a movie service,” says Ross Rubin, principal analyst at Reticle Research. ”Perhaps no retailer has moved as deftly from selling content as physical product to selling digital product.” Amazon also jumped into content development with its two-year-old Amazon Studios. Echoing Netflix’s pioneering moves, like the revival of the beloved sitcom Arrested Development, Studios is reportedly finalizing a deal for its first pilot, called Browsers, a musical-comedy series by author and former Daily Show executive producer David Javerbaum.
After a judge approved a settlement between the Department of Justice and three major book publishers in September, Amazon was free to sell e-books at a loss again. That drives Kindle sales and is expected to go a long way toward expanding its already dominant 60 percent of the e-book market. Amazon has also taken on the traditional publishers directly, creating the revolutionary Kindle Direct Publishing self-publish system, as well as forming its own imprints and signing authors like thriller scribe Barry Eisler, self-help guru Timothy Ferriss for his book The 4-Hour Chef, and Penny Marshall for her memoir My Mother Was Nuts. This hasn’t sat entirely well: A recent New York Times article suggested there’s a revolt brewing among bookstores that are now refusing to promote — or in some cases even stock — books by Amazon authors. (Observers say the measly 2,000 hardcover copies sold of Marshall’s memoir in its first week is likely attributable to this.) ”We represent 1,500 booksellers across the country and we’re digging in,” says Becky Anderson, president of the American Booksellers Association. ”Amazon is free-riding on our expertise, our promotions, our relationships with authors and readers.” Complaints aside, the company’s oversize influence remains daunting. On Nov. 8, the ”buy” button temporarily disappeared from e-books sold by major publishers. Amazon described it as a technical glitch. Whatever the issue, it was a reminder of how much power the company wields.
Amazon saw early on that our digital future would live in the cloud. It began Amazon Web Services in 2002 and is now by far the world’s largest cloud service. For consumers, this means that buying and storing MP3s, videos, and e-books — and accessing them on computers, tablets (mainly Kindles), and phones — has become a slick, seamless process. Notably, Amazon’s cloud is now home to data for many of the biggest online companies in the world — and even hosts video for rival Netflix.
Amazon’s purchase of robotics firm Kiva Systems this past spring has given it perhaps the world’s most advanced warehouses. It even offers that holy grail of retail: same-day delivery in 10 cities. It’s the kind of prowess that remains a threat to retailers like Barnes & Noble. Even Walmart, the world’s largest retailer, is feeling the heat and recently decided to halt sales of Kindles.
Really, this is all just a sampling of Amazon’s moves. (Have you heard about the wine store?) Mike McGuire, media industry research VP at Gartner Research, says the company’s reach is almost unprecedented. ”They’re a new type of media company. It’s a new species almost,” he says. The only question now is how big it can possibly get.