> No one makes money selling media for consumption anymore. That market is quickly and brutally dying. The media market is now so efficient that all profit is completely sucked out of the equation by the time you get to the consumption delivery system, to the point that it is barely possible to break even.
This part resonated with me a lot. The media market was always a race to the bottom. iTunes only proved there was a market, not that it could be profitable once there a multiple entrants with closed ecosystems competing for attention.
I think Amazon is full of smart people, but they need to focus on what they're good at to increase their profits. Their core businesses simply aren't profitable enough for them to try to compete with Apple and Google. They should fix that problem first and then turn to the more ambitious projects.
This is a common belief among people in tech. It is also disastrously false. Frozen has sold 1.2 billion dollars worth of tickets. The related IP alone, to say nothing of merchandising, will be sold for decades to come, and bring in additional billions.
You know the DVD, a dead format that can be trivially pirated? Yeah, they sold 3.2 million copies of Frozen. In a day.
The author is somewhat right. It's only profitable when you have a walled garden that you control, so you can squeeze markup out of the supplier.
Distribution of media is just not a profitable enterprise now. Too many closed, competing ecosystems and the entrenched now have so much capital acquired from other, more profitable ventures (Google from Search/Advertising, Apple from Hardware), that it makes little sense for anyone else to try unless they plan to be really different or disruptive.
Is this false though? For all the success of the itunes store I seem to remember it not actually making a lot of profit from content?
Software updates are rare, the menus are convoluted and obtuse, when the newer models you have to know secret touch zones to use different features. Simple options that used to exist have disappeared and new options of questionable utility have taken their place.
Probably my favorite thing about the Kindle is that it syncs my place with my phone, but the app on iOS is gotten much worse over the years. At this point when reading a book the timeline thing at the bottom and all sorts of weird little blue dots on it that I've never been able to figure out. Sometimes if you tap on one it goes away.
The things just smack of strange decisions. Who thought it would be a good idea to remove the page current buttons for two or three years in a row? And when they brought them back or not real buttons, but hopefully they're good enough.
In the meantime the books are still absolutely riddled with typos, terrible formatting, and if a publisher actually makes an update to a book you're unlikely to find out about it. What little I've heard of the authorship side of things is supposed be pretty dreadful too, were even recent kindles don't support some of the newest formatting things because Amazon hasn't bothered to update them.
It's the best e-book reader on the market, and in many ways it's a piece of crap. It's so clear the decision seem to be made by marketing or something else instead of what the readers want.
And sadly this experience seems to match what I've heard about other Amazon hardware. At best they behave like a mediocre hardware company who doesn't understand software. Even their flagship devices like the original Kindle fire have serious issues, which if you're lucky get fixed in a software update later.
My, what a ringing endorsement.
The problem is not because the market is too efficient.
Amazon made Echo for 'alexa, order me wheat thins', and all the question answering and music playing is just window dressing.
I'm struggling to find a reason why ordering anything via Echo is a good idea. I wouldn't use Siri to order anything, so I'm not sure why I'd want to do this either. I like to research things before I buy them and so do most Amazon users (even if it's a quick glimpse at the overall rating). Do I have to have a long Q/A session with Echo to determine which specific type of socks I'd like it to order? It seems faster to just do this myself via my phone or laptop.
I'm not going to switch to Google Shopping because I can tell my phone to order things. I use Amazon because Amazon is the best place to buy things (for numerous reasons), and until that changes talking to my phone or a device in my house ins't going to effect this decision.
This just feels like a solution that no one was asking for, and that's generally the worst kind of product.
Edit: After multiple people pointed out that this WOULD be useful for re-ordering certain types of things (mainly food/kitchen stuff), I agree it would be useful for that purpose. That said, I think Amazon should be marketing this with that in mind, and the first place this should live is your kitchen, not your living room.
Have you tried Google shopping with Voice integration? It's pretty amazing. You say "Ok google, buy me Triscuts" and four hours later, there's Triscuts at the door.
If my grandpa were still alive I would totally set him up with this.
I definitely would like to read reviews and compare prices when buying a big ticket item like a tv or computer, but for repetitive or impulse purchases I would love to be able to make them with the least amount of friction possible.
I agree.
But reordering things...
I also think the drones are for this small, frequently ordered stuff.
But I don't buy that almost everyone will have it in their pocket, given the number of times I see people looking for their phones all over the place.
If that's the case, they should worry about Google Shopping Express and same-day delivery vs. 2-day after it's shipped. When Google does roll it out to most US metros, they likely are going to add it as an option to "Ok Google". And in a few hours, your order will be on your doorstep.
I mean, Amazon's delivery chain is absolutely amazing, but it simply can't compete with local delivery.
I'm sure they do. And I'm sure something will happen in the US too. Meanwhile in the UK, Amazon has started rolling out their own delivery depots to complement their large warehouses, and leaving partners to do local delivery from their depots instead of the full end-to-end delivery.
Recently they announced that as a part result of this, they've signed a deal with a retail magazine distributor to deliver your packages to local shops etc. for pickup.
Not quite Google Shopping Express - yet - but it means that you can shortly get your packages in ~12 hours nearly UK wide, from an inventory my local stores can't compete with, because they're constrained by the cost of retail space.
> I mean, Amazon's delivery chain is absolutely amazing, but it simply can't compete with local delivery.
Most of what I've ordered from Amazon over the last year isn't available from local shops. A lot of it isn't even available from Amazons UK warehouses, and end up getting drop-shipped from other parts of the world. That's what stops me from going other places: Amazon aggregates a whole lot of sources that extends the products available to me far beyond what a service that aggregates local companies can.
And I bet that following the rollout of their local depots, they'll start predictively moving stock of their best selling products ahead of time to cut times further. Especially since the more they push through those depots, the more flexibility they will have in route scheduling for the last leg delivery to cut delivery times even further.
I was long very negative on the short/medium term potential for speech recognition, but while I still don't use it very often, it's convenient in enough situations that I use it now and again.
In this hit based model, they can afford more than a few misses and they have already had plenty of hits (AWS, Kindle).
As an investor your question is: would you rather Amazon invest $50-300M trying things out with the advantage of their brand, position and infrastructure - or do you want them returning that money, pay tax on it only for you to have to find somewhere else to park it?
> No one makes money selling media for consumption anymore.
This couldn't be further from the truth. Cable is dying and tech and media companies are currently running a multi-billion dollar race in working out who will own whatever platform is next (Amazon buying streaming rights, building tablets and phones etc. is part of their version of what they hope next platform will be - winner(s) take hundreds of billions in market cap).
It is so untrue that as soon as Time Warner dropped their print and cable businesses Murdoch offered $85 billion for the content business that remained and they turned him down.
Can you elaborate on this? Google tries plenty of "moonshots" that may never return profits to shareholders
For some reason Google investing in projects makes a sense for a lot of people, while for Amazon it doesn't even though it has produced business lines outside of their main that have more revenue and margin than anything Google have done.
Is that really true? No one makes money selling music, apps, or books on iTunes? Netflix doesn't make money selling a media consumption service? HBO doesn't make money selling premium content?
Those are all examples of media. And they're all capable of making money for their creators and distributors.
> That market is quickly and brutally dying. The media market is now so efficient that all profit is completely sucked out of the equation by the time you get to the consumption delivery system, to the point that it is barely possible to break even.
I don't think he's claiming that copyright owners can't make money selling copyrighted material. It sounds like he's claiming that the delivery networks can't make money.
So I call it clickbait.
Maybe call it Amazon's Echo Chamber instead.
On a side note, having to hover over the title to expose the date is a silly UX.
I changed the title anyway.
Not originally - it was titled Amazon Has No Taste, and was changed to Amazon Echo. Even the current title (Amazon's Echo Chamber) is link-baity IMHO.
I've been helping a non-profit publish some books on Amazon and it has been rather trying.
It is silly, the book comes out great printed through Amazon Createspace and looks great on Kindle, but it gets taken off Kindle Direct Publishing because it is not using English or one of the handful of supported languages.
Why not let people use other languages if they mark the e-book appropriately?
The official Amazon answer has been that they can not guarantee quality in other languages and thus they do not support it.
The problem is that unless you are using one of the limited number of official language Amazon will delete your e-book. https://kdp.amazon.com/help?topicId=A9FDO0A3V0119
Welsh writers managed to raise up enough of a stink about it: http://www.walesonline.co.uk/news/wales-news/amazon-sparks-l...
Still it seems ridiculous that only way to get decent CS is through PR.
The markets have been punishing them for their tactic of throwing it against a wall and seeing if it sticks. Ultimately, I think what allows a company like Apple to get ahead was the ability to say 'no', 'it isn't ready', 'do this better', 'redesign that', 'this sucks - can the project'. Bezos does not appear to run his company that way. It seems like he has a bunch of lieutenants building things, but nobody telling them 'NO!'
The author highlights one thing: Amazon is trying too hard to be everything to everyone, failing to excel in most ventures.
Don't get me wrong, I love their core business', use amazon prime, the web services have definitely been a game changer and the kindle makes my life on caltrain nice. But I'm certainly not going to invest in them until they start to show that they've learned to say 'no'.
But in reality, it's not the hits that Amazon counts on--it's the recurring revenue of Prime and Unlimited subscriptions and loyalty around lots and lots of low-margin purchases. To keep those memberships coming, you don't need to be a hit machine--you just need to keep offering incremental useful value, mediocre as it may be alone, to add value to the subscription.
I think that's the angle. It's not that Costco hot dogs are the best hot dogs in the industry for $1.50 (or $4.99 rotisserie chickens, or car buying services, etc.), it's just that these items add enough value to enough peoples' Costco experience that they renew memberships and spend a lot of cash on low-margin stuff.
This stood out though:
>Amazon’s retail strategy of being allergic to profit does not translate well into hardware manufacturing.
Don't most gaming consoles sell at a loss? The pickup for the console maker is on the publishing rights & distribution channels and the fact they take a gamble that the hardware will get cheaper over the course of that hardware generation. I had always though that it what Amazon was trying to emulate with their hardware attempts.
Initially, yes. Nintendo has traditionally turned a profit on most of their consoles (I'm not sure about the new one), but for the last several generations Microsoft and Sony have been losing money on each console purchase - at least initially. Later during the lifespan of the console the component cost has usually dropped enough that they start to turn a profit
Also called "success."
You can make a business selling cheap crap with powerful marketing. It's not noble, but it's probably the norm.
Amazon just hasn't realized yet that it needs to stop competing with Apple and Google and start competing with SkyMall, As Seen on TV, and the dollar stores.
(Half joking. But only half.)
I understood Amazon's hardware to be the opposite of Apple. Cupertino makes their profit on hardware mark up, so it makes sense that everything you buy on iTunes is as cheap as possible - standard complementary products theory. Since Amazon has primarily got their (marginal) profits from selling you content, it made sense that their ebook readers, phones, and tablets are cheap.
I don't get the Kindle Voyage. Premium priced hardware doesn't fit into their model. And now the Echo. I can't even guess how they think they will make money with this thing, or how it could generate more sales anywhere else in the org.
They author says "No one makes money selling media for consumption anymore". But surely a properly executed (key word: "properly") foray into mobile devices is better for Amazon than staying out of it? If they can create a good value proposition for the hardware and a good software ecosystem too, that would be better for them then missing out on mobile consumption of all that media they've put so much effort into.
Or am I just completely wrong?
There are a LOT of people that use Amazon to buy things.
A lot of people don't know the difference between phones.
If Amazon has a giant splash screen saying it has a phone, naturally people will buy it just because they don't know any better (eg. 65 yr old Grandmas in Arkansas).
Additionally, Amazon is a long term company and they know that if they want their foot in the phone game they need to start somewhere so they did.
They have never cared about hardcore techies or even their investors. They are one of the most long term focused companies alive right now. They believe in iteration like a religion and they understand the average consumer.
It makes sense because it will make cents.
Amazon has to remember they're in the product sales business, and their hardware exists ONLY to facilitate sales where some customers otherwise have trouble figuring out how to get it. Kindle is great for people who don't have another ebook reader; make sure every platform imaginable has Kindle software available. Fire is great for people who aren't buying into any other tablet ecosystem; make sure good content consumption apps are available on all other tablets. Fire Phone should be a decent phone for those wanting a phone and otherwise uncommitted to other makers; make sure all other phones consume Amazon content easily. Fire TV should be a fine media player; get Amazon Video onto AppleTV and Roku ASAP. Amazon should view their own hardware as nothing more than gap filler where customers haven't committed to other options which should be pursued by Amazon with equal vigor.
For Amazon, exclusive hardware is dangerous. It should complement the competition, not compete where others are superior.
i bought 7 kindle fires for my household (i have 6 kids) largely because it's the best deal you can get on a tablet and it performs it's function extremely well (i.e. media consumption device coupled with some games here and there). i don't think any objective measure of kindle fire can relegate it to failure just because it doesn't have the premium experience you get with a tablet that is 6 times the price. i personally do not think the apple experience is worth 6 times the price.
i've no idea if the the fire tv stick is going to be a good device, but the fact that it cost me $20 coupled with the positive media experience i get on our multiple fire tablets was enough to get me to buy one and try it out.
similarly, i can get amazon echo for $99 and i just signed up to try it out. i've long wanted a device with the presence and interface of a star trek computer. i'm skeptical that the technology is there yet to provide the kind of experience that i know will enhance the life of my family, but it's promise is exactly what i want and i don't see anyone else out there trying it esp. at the price point.
i think it's a bit myopic to relegate all of amazon's hardware strategy to the failure bin just because they had a clear failure in the fire phone. the other devices all seem to offer compelling reasons to try them out (not the least of which is price point).
A lot of people have recommended a Kindle to me but I've held off. I can't get past the massive Amazon logo on it and the awful page turn.
The strategy is simple: If 100 million people only have an Amazon device (and do not have a Google or Apple device) and one of those people wants to watch the latest James Bond film or English Premier League final, then Amazon can take a 30% cut of the price the user (or advertiser) pays.
Amazon's execution may fail because their hardware is crap and are losing to Android and Apple, but their idea is sound.
That said, Amazon's phone is the only product I thought made little sense. The Kindles are successful and drive ebook consumption. Fire TV I have no idea, but the Roku has proven that the basic idea has a market. What other giant hardware stumbles has Amazon launched?
And you don't even mention it in the blog post. Nice.
Edit: It appears the title has been changed. Sorry for the asshole tone above, but I don't like clickbait.
