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Amazon to Get Exclusive Streaming License for “Downton Abbey”

Posted on Thursday, Feb 7th 2013

According to eMarketer, worldwide ecommerce sales crossed $1 trillion last year. E-commerce sales were driven by growth in North America and Asia Pacific, where sales grew 14% and 33%, respectively. The North American market remained the leader with sales of $365 billion, but Asia Pacific markets are catching up and reported sales of $332 billion for the year. The researcher estimates global e-commerce sales to grow to $1.3 trillion this year. Sales in the U.S. are projected to grow to $385 billion in 2013 from an estimated $343 billion last year.

Amazon’s Financials

Online retail giant Amazon’s (NASDAQ:AMZN) Q4 revenues grew 22% over the year to $21.27 billion, missing the Street’s target of $22.3 billion. EPS continued to disappoint as well, as the quarter’s income fell from $0.38 a year ago to $0.21 and missed the Street’s target of $0.29.

For the quarter, media revenues grew 8% over the year to $6.51 billion. Electronics and general merchandise (EGM) revenues grew 28% to $13.93 billion. They ended the year with more than 200 million active customer accounts and two million active seller accounts worldwide. Worldwide active seller accounts were more than two million.

By region, revenues from North America grew 23% to $12.17 billion and international revenues grew 21% to $9.09 billion.

Amazon ended the previous year with revenues of $61 billion, recording growth of 27% over the year. Net loss for the year came in at $0.09 per share translating to $39 million. A year ago, Amazon had reported earnings of $631 million. The year’s losses were attributed to increased investment by Amazon in developing fulfillment centers and international markets.

For the current quarter, Amazon projected revenues $15 billion-$16.6 billion compared with Street targets of $16.9 billion.

Amazon’s Increasing Investments

Amazon continued to increase investments in new fulfillment centers. During the last quarter, fulfillment costs grew 35% over the year to $2.2 billion. Last month, the company announced plans to open three new centers in Texas. Amazon plans to hire 1,000 employees to work in their fulfillment centers in Schertz, Coppell, and Haslet. The centers will cater to goods ranging from larger products like TVs to smaller ones like books and smaller electronics.

Amazon’s Digital Expansion

As part of Amazon’s expansion in the digital world, the company launched their virtual currency, Amazon Coins. Starting in May 2013, Amazon Coins will be available to U.S. consumers for use for the purchase of apps, games, and in-app items on the Kindle Fire tablets. For now, though, Amazon Coins will not be available for use on Amazon’s retail website. As part of the arrangement, developers who accept Amazon Coins for payment will receive a 70% revenue share, the same percentage they get when a user purchases an app using a credit card. Initially, Amazon plans to launch a promotion to roll out the Coins free, but later on, Coins will cost a cent each.

Amazon is also investing heavily in their digital library. Recently, they entered into an agreement with PBS Distribution to extend the archive of television shows and films currently available on Amazon Prime Instant Video. As part of the agreement, Amazon will also become the exclusive online stream provider for the popular BBC series “Downton Abbey.” Exclusive rights to season 3 streaming will begin this summer, and by the end of the year, all other seasons for the series will also become exclusive to Amazon. This very bad news for Netflix, as “Downton Abbey” has been a hit show with a huge following. The current season has a following of more than 6.6 million viewers. Last quarter, Amazon also entered into an agreement with Turner & Warner to expand their video library.

Last month, Amazon signaled a go-ahead for five original children’s shows for production. Besides this original programming, Amazon initiated production for six comedy pilots in December 2012. Once completed, these pilots will be available for viewers on Amazon Instant Video, Prime Instant Video, LOVEFiLM UK, and LOVEFiLM Germany, for Amazon customers. Amazon will decide which of the series to produce based on viewer feedback on the pilots. Amazon does not disclose details about their Prime Video subscriber base, but in the recent call they did mention that the base has increased significantly over the past year.

Amazon’s Web Service, AWS, has also witnessed strong growth. Amazon does not break out revenues by service, but analysts estimate that AWS recorded revenues of over $2 billion last year. The market expects to see strong growth in the segment, with revenues projected to rise to $3.8 billion by the end of the current year and to $8.8 billion by the year 2015. To drive AWS’s growth, Amazon recently launched a scalable service that will let consumers convert their video content to multiple formats. Viewers will be able to convert high-resolution video files into smaller versions that can be uploaded on websites and other video platforms. The service will eliminate the need for consumers to purchase expensive transcoding software. Developers and businesses will be able to process multiple videos at once and based on their priority. The service will not have any committed or upfront fees; instead, customers will be able to purchase the use of the service based on the minutes they need to transcode.

Amazon’s stock is trading at $262.22 with a market capitalization of $119.19 billion. It touched an all-time high of $284.72 last month.

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