Comment by zbobet2012 | Hacker News Reader

Comment by zbobet2012 | Hacker News Reader

Parent Full thread

Amazon paid 7 billion in content costs this year, I would estimate it cost another 1.5billion to do the distribution. That doesn't include internal development costs, advertising costs, etc.

Prime all together only made 14 billion. Considering that prime almost assuredly doesn't cover its 2day shipping we can be very sure, the video unit is _certainly_ not positive.

What's even more important is this quote from Bezos, which directly states it's their strategy:

"We get to monetize [our subscription video] in a very unusual way," Bezos said. "When we win a Golden Globe, it helps us sell more shoes. And it does that in a very direct way. Because if you look at Prime members, they buy more on Amazon than non-Prime members, and one of the reasons they do that is once they pay their annual fee, they're looking around to see, 'How can I get more value out of the program?' And so they look across more categories — they shop more. A lot of their behaviors change in ways that are very attractive to us as a business. And the customers utilize more of our services"

https://www.businessinsider.com/amazon-ceo-jeff-bezos-said-s...

It's a _publically stated strategy_.

That's just describing the strategy of likely the majority of retailers in existence, from grocery stores to theaters though isn't it? Grocery stores have lead products that get people in the stores (like cheap roast chicken) and then make more margins elsewhere. Fast food sells burgers and hope people will buy fries. When theaters have movies that have won awards and have big buzz, it helps them sell more snacks. Department stores, classic electronics stores, and so on all have window display items and major flashy things that they hope will get people to come inside at all, at which point they may get those, get add-ons, or something else entirely.

Maybe for subscription video specifically Amazon is more unusual, but it's certainly not because Bezos came up with some wild strategy. Movie and TV producers themselves aim for far more monetization than just the sticker; merchandizing, product placement, ancillary media (sountracks/interviews/tie-ins), etc are all things commonly aimed for. And even for subscriptions there are players like Apple, who clearly are interested in selling more Apple hardware.

I guess what bothers me about what you're saying is that I don't think it makes sense that every single unit in a company needs to "pay its own way", and on the contrary that sort of reasoning in management is the source of a lot of horrors many of us have experienced in IT. Security say gets cut to the bone because it's "not a revenue generator" and down the road systems get broken into causing tons of costly damage (infuriatingly often externalized too to add salt to the wound). Outsourcing sometimes can be an answer, but that sometimes creates its own major headaches as well. Amazon's size and weight certain give rise to concerns that might be lower elsewhere, but some of the bonuses they bring represent quite genuine economic value, and either way I don't think justify what seems to be a general argument against vertical integration.

It's a different strategy. Prime is an investment up front, so it puts people in the mindset of wanting to come up ahead. By buying full Prime, you've essentially prepaid $120 in shipping costs, so you want to take advantage of it and order more than $120 worth in free shipping. Which means you'll likely shift your non-Amazon purchases to Amazon (especially with free shipping making it a cheaper option for some of your orders), and as a result order more there than you would have otherwise.

My guess is that Prime Video exists as a "gateway drug"; you get it for the videos and then realize that extra $4/month or $11/year will get you free shipping, and then you're back to "if I order $120 worth of shipping, it'll pay itself back" thinking.

> It's a different strategy. Prime is an investment up front, so it puts people in the mindset of wanting to come up ahead. By buying full Prime, you've essentially prepaid $120 in shipping costs, so you want to take advantage of it and order more than $120 worth in free shipping.

Some retailers do this too, mainly warehouse clubs (e.g. Costco and Sam's Club).

>It's a different strategy. Prime is an investment up front, so it puts people in the mindset of wanting to come up ahead

So, Costco? Or other member/buyer-club type things across many industries? It seems to have become somewhat less common, but it's still not remotely a unique idea. Psychologically, even expiring coupons and sales invoke some of that feeling of "use it or lose it".

>My guess is that Prime Video exists as a "gateway drug"; you get it for the videos and then realize that extra $4/month or $11/year will get you free shipping, and then you're back to "if I order $120 worth of shipping, it'll pay itself back" thinking.

It's interesting you have that perspective because I've always heard and experienced it as the opposite, though I haven't followed it for a while. Prime of course started based fully around shipping, and it has seemed fairly common for a lot of old Prime users at least to never use any other Amazon services at all despite them really, really pushing them. I never have either personally fwiw. If you're doing enough business with Amazon (~$5.1k+/year) it's also probably more direct to just use their dedicated card I guess.

And there's a reason upfront costing has faded in general, it's usually discouraging rather then encouraging. Causation seems more likely to flow the other way: somebody looks and sees they're doing quite a lot with Amazon already, and then decides to try to further leverage it. Of course, Amazon certainly wants to encourage this and support it so that customers don't "grow out of them", and being a full fat full service provider probably can aid them in retention. I'm not sure all this supports the original contention however.

Very common practice everywhere. When you sit at a bar and only order food, they usually lose money. Profits come from drinks.

And Netflix is borrowing billions of year on content....

Reply on news.ycombinator.com