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Amazon Sales on the Rise, but Expansion is Costly

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July 28, 2011
  • Amazon announced this week that its revenue increased a staggering 51 percent to $9.9 billion in Q2, with significant help from the highly successful ad-supported Kindle (now the most popular version of the e-reader).
  • Amazon finance chief Tom Szkutak explains this marks the Seattle-based company’s best growth rate in 10 years.
  • However, the growth also comes at a cost; profit declined 8 percent as the world’s largest online retailer continued to invest in fulfillment centers and digital offerings. Additionally, operating expenses rose 54 percent.
  • Amazon also had 5,300 new hires in the quarter, giving the company a total of 43,200 employees, up from 28,300 a year ago.
  • Investors appear unruffled by Amazon’s infrastructure spending; stock rose 5.7 percent to $226.40 on Tuesday.

Borders to Close its Doors for Good by September

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July 19, 2011
  • Following failed attempts to draw investor interest in a bankruptcy court auction, Borders Group Inc. has announced it will liquidate its remaining assets.
  • The second-largest U.S. bookstore chain says it will start liquidating its remaining 399 stores as soon as Friday, with the business to be shuttered for good by September. The company employs nearly 11,000 people.
  • “We were all working hard toward a different outcome, but the head winds we have been facing for quite some time, including the rapidly changing book industry, [electronic reader] revolution and turbulent economy, have brought us to where we are now,” explained Borders President Mike Edwards.
  • Analysts have expressed concern that the demise of Borders may speed the decline in book sales and possibly make it more challenging for new writers to be discovered. Michael Norris, a senior analyst at Simba Information added, “Thousands of people whose job consisted of talking up and selling books will eventually being doing something else, and that’s bad for authors, agents, and everyone associated with the value chain in books.”
  • ETCentric staffer Dennis Kuba commented: “Looks like Amazon has one more to go. I’ll miss browsing through the stacks.”

Insiders say Amazon Plans to Launch an iPad Rival

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July 14, 2011
  • Amazon may be selling a tablet computer as early as October, report people familiar with the matter.
  • The new tablet is expected to feature a 9-inch screen and run on Android’s operating system (but will reportedly not include a camera). An Amazon-designed second tablet may be available next year.
  • Amazon is still expected to introduce two new Kindles in the third quarter.
  • With its own online retail operation, Amazon is well positioned to compete with Apple. Moreover, one analyst says Amazon can offer a cheaper alternative and make up the difference with movie, music and book sales.

Insiders Say Netflix Not Interested in Acquiring Hulu

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July 12, 2011
  • Netflix is reportedly not among the handful of companies currently considering a purchase of Hulu.
  • Sources “familiar with the matter” indicate Netflix was absent from the first round of bidding presentations that concluded last week.
  • The same sources also suggest that Hulu has no interest in seeing its biggest rival take it over.
  • Google, Microsoft, Amazon and Yahoo are reportedly still among the companies interested in the TV streaming service.

Amazon Announces Cloud Drive and Cloud Player Updates

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July 7, 2011
  • Amazon announced several notable enhancements to its Cloud Drive and Cloud Player service this week.
  • The Cloud Player is finally available for the iPad and has been optimized for Safari (joining existing apps for the Android phone, Android tablet, Mac, and PC).
  • New customers who register for the annual $20/20GB plan will receive unlimited space for music tracks.
  • Cloud Drive users can also store all of their previously Amazon-purchased MP3s for free.

Cloud Music Services Continue to Face Legal Questions

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July 6, 2011
  • The legal debate continues regarding the divergent approaches to cloud-based music lockers proposed by Amazon, Google and Apple.
  • The 2008 Cablevision decision in the Second Circuit U.S. Court of Appeals allowed for a remote DVR feature (when done at the direction of users and separate copies were stored for each user as would be done for an in-home DVR). The decision is the strongest legal case for a music locker service.
  • EMI’s current suit against MP3tunes.com will also impact the situation. EMI asserts that music locker services must remove material if they become “aware of facts or circumstances from which infringing activity is apparent.”
  • While Apple has signed agreements with the major labels, it has not yet done so with smaller labels.
  • According to Ars Technica: “Either Apple wasted millions of dollars on licenses it doesn’t need, or Amazon and Google are vulnerable to massive copyright lawsuits.”
  • Google and Amazon will assert their rights under DMCA Safe Harbor and the Cablevision case. In addition, they may have some protection under rights they have to sell music through their online stores.

MediaMall PlayLater Serves as DVR for Online Video

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June 30, 2011
  • MediaMall, the group behind the popular PlayOn media software, announced this week a closed beta of an online service that allows users to record online video for later viewing (including offline).
  • PlayLater works similarly to a DVR, allowing “recording” of online video from sites such as Hulu, Netflix, Amazon and major networks.
  • Early reporting suggests playback of DRM protected files only on approved programs running on PC (using Windows Media Player), Android, iOS, Google TV, game systems, etc.
  • PlayLater is expected to eventually be available for $5/month, or $50/year.
  • CrunchGear reports: “Believe it or not, the term DVR is actually appropriate here. I’ve used the service and it actually records the programming and wraps the video file in a DRM-laced .plv container that’s only playable on approved programs.”

Amazon Launches Ad Network in Partnership with Triggit

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June 29, 2011
  • Amazon announced it is now selling ads using data it has collected from its shoppers.
  • “The e-commerce giant has started what is effectively an ad network where it buys Web advertising inventory and resells it to marketers at a premium.”
  • Amazon is using Demand Side Platform (DSP) technology from San Francisco-based ad tech company Triggit.
  • Its partnership with Triggit enables Amazon to track users with cookies and feed them a custom ad.
  • The approach has the potential to track the ad from the user to an actual purchase on Amazon.

$139 Nook Introduced; E-Reader Announcements from Amazon and Kobo

By
May 26, 2011

This has been a significant week for new product announcements as the e-reader war rages on. New devices, features, price points, sales reports (and a potential acquisition) have been announced from Kobo, Barnes & Noble and Amazon.

Canadian-based Kobo announced its new $130 Kobo eReader Touch Edition will ship in June. CNET expressed concern regarding the general speed of the Wi-Fi device and the new Freescale i.MX508 that powers the e-reader, but added: “That said, the Kobo Touch Edition has a compact, elegant design, with only a couple of buttons (since this is a touch-screen e-reader, there’s a built-in virtual keyboard). I didn’t see a Web browser and like other Kobo e-readers, the device seems very reading-centric. It’s also geared to the international market, with Kobo making a push into several countries, most notably Germany, which has the fastest growing e-book market outside the U.S.”

The next day, Barnes & Noble announced it will also have a new e-reader available in June. The new $139 Wi-Fi Nook claims to have the longest battery life of available e-readers (up to two months) and a growing bookstore (with over two million current titles). The Nook has reportedly been a major contributing factor in Liberty Media’s interest in a potential acquisition. The Wall Street Journal reports: “Liberty executives in recent days have said Barnes & Noble’s digital strategy played a key role in their decision to make a $17-a-share bid for control of the company.”

Not to be outdone, a few hours following the B&N announcement Amazon unveiled its all-new Kindle 3G with Special Offers (currently available) — an ad-supported 3G and Wi-Fi device weighing only 8.7 ounces and featuring improved screen contrast with the latest E Ink Pearl technology. At $164, it costs $50 more than the non-3G ad-supported version (reported last month by ETCentric), but $25 less than the ad-free equivalent.

Can the other e-readers compete with the number of current Kindle options? That question remains to be answered — as does the speculation that e-readers may eventually be replaced by more affordable tablet PCs. One thing is undeniable, however: the Kindle continues to gain in popularity.

In an Amazon press release issued last week, Amazon.com announced it is now selling more Kindle books than print books and the $114 Kindle with Special Offers is already the best-selling member of the Kindle family of products. According to the release: “Since April 1, for every 100 print books Amazon.com has sold, it has sold 105 Kindle books. This includes sales of hardcover and paperback books by Amazon where there is no Kindle edition. Free Kindle books are excluded and if included would make the number even higher.”

Related Wired post: “Amazon Brings Ads to Kindle 3G” (5/25/11)

Related Wall Street Journal article (with video): “Amazon Introduces Cheaper, 3G-Enabled E-Reader with Ads” (5/25/11)

Related CNET article (with video): “Kobo unveils Wi-Fi Touch Edition e-reader for $129.99” (5/23/11)

Related Kobo Blog post (with video): “The Rumors are True! Kobo Launches the Kobo eReader Touch Edition Today” (5/23/11)

Related Wall Street Journal article: “Liberty Says Nook Inspired B&N Bid” (5/24/11)

Apple Plans Cloud-Based Music Service

By
May 3, 2011

Apple is planning a cloud-based music locker service that will enable its customers to stream music to multiple devices. The Wall Street Journal reports that what makes the Apple proposal different from Amazon’s recent Cloud Drive rollout is that Apple is seeking paid licenses from the labels for its service (Amazon started its service without gaining such approval).

Although the Apple version has yet to go public, insiders report that it will work differently than the Amazon Cloud Drive and Player, which acts much like an external hard drive. Through deals with the labels, the Apple service will allow for a single master copy of a song to be stored on its servers, that can then be shared with multiple users (the Amazon service requires users to upload each song they want to access remotely).

“The idea is that Apple will let users store songs they’ve purchased from its iTunes store, as well as others songs stored on their hard drives, and listen to them on multiple devices,” reports WSJ.

Recent rumors suggest Apple will charge users an annual subscription fee, possibly in the area of $20.

Related Wall Street Journal article: “Amazon’s Cloud Music Move Isn’t Earth-Shaking” (3/29/11)

Related Wall Street Journal article: “Amazon’s Cloud Service Is A) Legal B) Illegal? C) Probably Here To Stay” (3/29/11)

Related Los Angeles Times article: “Price war! Amazon launches 69-cent MP3 store for top-selling tunes” (4/28/11)

Related TechCrunch article: “Behind the Scenes: Record Label Demands from Amazon” (4/29/11)

Related CNET article: “Expect Apple to charge for music cloud” (4/26/11)

Amazon Launches its New Ad-Supported Kindle

By
April 28, 2011

Amazon announced that its new ad-supported Kindle will launch April 27, nearly a week earlier than originally expected. The e-reader — dubbed Kindle with Special Offers — will ship for $114 through Amazon, Target and Best Buy (that’s $25 less than the Wi-Fi only version).

According to Amazon, the cost reduction is a result of the device being subsidized by advertising. Early sponsors include General Motors, Proctor & Gamble and Visa. “Special offers” will be made available directly to the new Kindle related to Amazon.com gift cards, audible books and products from the various Amazon stores.

The latest Kindle is 21 percent smaller and 17 percent lighter than its predecessor, but features the same 6-inch reading area. The company claims the device features the “most advanced E Ink Pearl display technology” and touts 50 percent improved screen contrast with crisper, darker fonts.

It’s worth noting that the ad-supported model is getting more press than the Kindle’s new specs. We’ve seen similar approaches with other devices and services in the past, with mixed results. It will be interesting to see how consumers respond.

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