The news that Amazon turned a profit may have been welcome to some, including Wall Street. It certainly brought good news for Jeff Bezos. Bloomberg noted that Amazon’s stock surge after the profit announcement “pushed his net worth to $53.2 billion, according to the Bloomberg Billionaires Index.”
This makes Bezos the third richest individual in the U.S., beating the Koch brothers, claims Bloomberg. It also makes him the fifth richest person on the planet, up from twentieth place at the beginning of the year.
You can put all kinds of interpretations on that news. Bloomberg itself got pretty sniffy about it. “If the company posts an operating loss – as Amazon has done for five of the last 10 quarters – investors pat you on the back for funneling their money into promising ventures. If you report a dinky quarterly profit, as Amazon did on Thursday, Wall Street is shocked – shocked!! – and congratulates you for being incredibly disciplined with investors’ money,” said Shira Ovide on Bloomberg, adding, correctly, “Few companies are treated with this kind of deference.”
One interpretation you can’t put on it is that Amazon is about to go under or go away any time soon. Amazon is under no financial pressure to modify its business model in any way whatsoever. If anything, it can use its stock surge as currency or collateral to fund further buildout.
Bloomberg couldn’t resist a hit at Walmart in passing, as it reported the news. “People don’t aspire to shop at Walmart,” Bloomberg quoted Ivan Feinseth, chief investment officer at Tigress Financial Partners, as saying. “An improving economy is a negative for Walmart. As incomes go up, people stop shopping there. Customers enjoy shopping at Amazon.” Linkage to a negative, falling economy is the last thing any company needs. And if that’s the market’s view on America’s biggest and most entrenched bricks-and-mortar retail giant, then where does that leave the bookstore chains?
Above all, this kind of news should show how completely mistaken the e-book haters’ anti-Amazon snark is. Amazon could lose heavily on every $50 Kindle Fire it sells – though as my analysis indicates, it won’t – and still roll in dough. It could leave the Big Five to their self-harm over agency pricing, and still plough money into growing the e-book market. I don’t see Wall Street rewarding a big trade publisher with that kind of stock hike any time soon. Money talks, and b/s walks.
Quote: “Above all, this kind of news should show how completely mistaken the e-book haters’ anti-Amazon snark is. Amazon could lose heavily on every $50 Kindle Fire it sells…”
Calm down Paul. Few if anyone is arguing that Amazon is “losing heavily” on those $50 Kindles. They’re simply suggesting that’s is probably a loss leader to sell Amazon content. That’s a common business practice (i.e razors and printers) and certainly not a criminal activity envisioned by “e-book haters.”
Investors aren’t draw by Amazon’s profits (or the absence thereof). They’re draw by the rising stock price. They’re investing with plans to later sell. That’s also why Bezos’ net worth comes with a serious caveat. His wealth is mostly in Amazon stock and is only as secure as that stock. That same bias tends to distort decision making. If Choice A is illegal if caught but will make me (Bezos) a billion dollars while Choice B is legal, there’s a strong tendency to go with Choice A.
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Also, retail markets have a pattern of flipping every half-century or so. Once upon a time, A&P dominated food sales. Now it’s barely alive. Why? In part because when the public began to want larger supermarkets with more selections, it stayed small. Safeway, Walmart and others didn’t. They caught the new wave.
Amazon (unlike Walmart) successfully guessed that buying online was a coming thing. But their very success in that area is likely to blind them to whatever shift follows. Doing well with one business model predisposes a company culture to reject change and even see it as an enemy.
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As I have pointed out elsewhere, the executives at the major publishing houses undoubtedly make mistakes (i.e. library sales rather than per-checkout fees), but they’re not stupid. They are quite aware that, given that ebooks sales in this country are heavily dominated by a bullying-prone Amazon, it isn’t to their long-term advantage to lower the prices of their ebook editions, increasing the proportion of ebook sales. Those high prices are, from their perspective, a feature not a bug.
Those who think ebook prices are too high need to work to get a richer, more competitive ebook retail market. Personally I’d love to see at least three major retailers, all with compatible ebook formats. At present, growing the ebook market simply means increasing Amazon’s dominance of all book retailing. That is not healthy for those who write, read and love books. It’d be like having one automaker manufacturing 70% of all cars sold in this country.
“I don’t see Wall Street rewarding a big trade publisher with that kind of stock hike any time soon.”
Exactly which big trade publishers are on the stock markets?
And exactly when did when Amazon start breaking out their numbers of their publishing endeavours?