There's A Reason It's Called Amazon -- January 10, 2024

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January 11, 2024: link here.

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From an earlier post, I wrote:

Finally, Amazon. I won't invest in Amazon. I don't think Jeff Bezos cares about his shareholders. Jeff Bezos seems only to care about his customers. He keeps adding more "product" and seldom raises prices. Some of his "products" are a la carte and cost extra, and if his prices / subscriptions ever get too high, one can start cutting back on some of the extras. Prime Video is awesome. Comes with the basic subscription. A music subscription costs a bit extra. Alexa is awesome though I don't ask her much. Amazon now charges a bit if one wants to watch Amazon Prime Video without ads. For me that was a no-brainer. I forget the cost, a couple of dollars a month and no commercials. Thursday Night Football (NFL) and Amazon introduced technology not used by the networks to watch the games. Pharmacy. Whole Foods.

Amazon. The customer service on delivery is incredible. Knock on wood, we have never, ever missed / lost a delivery. I don't even track deliveries any more. If something doesn't come I won't care. I'm very serious about that. I'll simply re-order. Inexpensive orders are dropped off at the door 14/7 -- between eight a.m. and ten p.m. every day of the week. If I order a high-value item, it is delivered to a locker about a mile down the road. 

Amazon. I have a number of non-perishable items delivered on a regular "subscription" basis, like K-cups (Starbuck coffee), generic Rogaine, anchovies. I will start adding more items like paper products. Every time a "subscription" item is ready to ship, Amazon asks if I still want the delivery. A simple one-click keeps the delivery as requested, or "skips" it.

Amazon. Yesterday, I went to order a book on Amazon. It turns out the book won't be published / released until August 14, 2024, or something like that. But if I pre-order it, which I did, Amazon guarantees the lowest price. Right now, the publisher says the book will be priced somewhere between $19.99 and $49.99. Quite a spread. I assume it will come out at $29.99 or $39.99 at a brick-and-mortar store (Barnes and Noble) or $19.99 at Amazon. If it comes out higher than $19.99, I still get it at the price I paid yesterday ($19.99) and if the price is lower upon publication, I will be refunded the difference.

Now this from The Hollywood Reporter: 

Mark your calendar: On Jan. 29, Amazon will unleash what one top advertising executive calls a “tornado” that will “upend” the streaming video landscape. The company will flip a switch and turn on ads for all of its Prime Video viewers. Users will have the option to pay $3 a month to remove the ads, but as the executive quips: “Almost no one will do that, are you kidding me?”

After all, people are paying Amazon for the fast shipping. Reacher and Thursday Night Football are thrown in for free. It’s a move that has marketers salivating and a few legacy media executives anxiously waiting to see what happens.

The move will instantly turn Amazon into a streaming-ad juggernaut, and the largest ad-supported subscription streaming platform in the marketplace with tens of millions of users, leapfrogging the likes of Netflix in the process.

Amazon, run by Andy Jassy, has always been coy about just how many Prime subscribers it has (the last official number, in 2021, was “more than 200 million”), but no one disputes that its reach is almost unrivaled. Consumer Intelligence Research Partners estimates that there are about 168 million Prime subs in the U.S. alone, as of 2023.

If just half those subs watch Prime Video content, it would be comparable to Netflix’s penetration in the U.S. (77 million) and significantly more subs than the likes of Hulu, Peacock or Paramount+.

Data from Nielsen reinforces that: While Netflix and YouTube take up the lion’s share of viewing time, Prime Video is extremely competitive. The latest Nielsen Gauge reported that 3.4 percent of TV viewing in November was Prime Video, compared to 2.7 percent for Hulu, 7.4 percent for Netflix and 9 percent for YouTube.

The Gauge certainly suggests that if Hulu has just shy of 50 million subscribers, as Disney has reported, then Amazon is at least in the same ballpark in terms of Prime subs that watch video content.

Most Netflix users, however, are not subscribing to the ad tier (the company said in November it had only 15 million “active users” of the tier), while some Hulu subcribers also opt out of ads.

That scale, in both subscriber reach and real viewership, has analysts thinking that Amazon will be able to quickly scoop up billions of ad dollars. Bank of America’s Justin Post estimated in a Januuary 3, 2024, note that the company will ultimately generate $3 billion in new ad revenue from the switch, and nearly $5 billion when accounting for users who opt to pay not to see ads. LightShed’s Rich Greenfield estimates that the company will hit $2 billion in ad revenue this year. Both analysts assume that the overwhelming majority of users will opt not to pay extra to remove the ads.

Let's post today's ticker and check back in on it a year from now:

A p/e of 80. And they say APPL is expensive at 30x earnings.