business news in context, analysis with attitude

by Kevin Coupe

An MNB reader made an observation a few months ago that I keep coming back to - that it seems like while Amazon for much of its existence prioritized customer satisfaction at any cost, these days it appears that the company has reframed that as customer satisfaction at an appropriate cost.

Which I thought about again when I read a piece in The Information about how "Amazon has discussed doing a stand-alone app for watching sports content … the move comes as CEO Andy Jassy doubles down on the company’s streaming ambitions."

The story pointed out that while Amazon "hasn’t made a decision about whether to proceed on the effort, the discussions suggest Amazon could be thinking about new ways to squeeze revenue out of the billions of dollars in deals it has inked to stream live sports events, which so far it has mostly included in the standard Prime membership.

"Jassy recently highlighted streaming rights for live sports in particular as a place he’ll likely keep spending even as Amazon steps up its efforts to cut costs in other areas of its business."

The story goes on:

"A self-contained sports app would declutter Amazon’s main Prime Video app and better highlight the company’s sports offerings, which include exclusive rights to the NFL’s Thursday Night Football franchise, as well as some Premier League soccer matches in the U.K. and Yankees baseball games in the New York region. Amazon also recently made a big push into sports talk shows, launching a lineup in November that churns out 60 hours of content per week.

"The discussion comes as Amazon has been spending heavily on sports streaming rights, including a reported $1 billion annually over 10 years for Thursday Night Football. Streaming executives say this could all point toward Amazon launching a separate streaming tier."

(It is worth pointing out that Amazon is playing a competitive game here - it apparently lost the negotiations to land the NFL's Sunday Ticket, with Google's YouTube TV signing a reported $2 billion-a-year contract for the package.)

I find this all interesting since it always seemed to be a strategic priority for Amazon to add value to Prime subscriptions whenever and wherever possible.  The calculus was simple - Prime members spent significantly more on Amazon than non-Prime members, and so the more people that were brought into the system, the better it was for Amazon.  (Jeff Bezos used to say that his goal was to make it "irresponsible" for people not to be members of Prime.)

The Information notes that "a new tier would be a significant break from Prime Video’s role as a driver of Prime subscriptions and e-commerce sales, unless Amazon were to offer the sports package exclusively as an add-on to the standard version of Prime."

This is where the notion of at any cost vs. at an appropriate cost begins to matter - since it seems like a decent bet that an Amazon prioritizing profitability and new revenue streams would be more likely to create a new tier separate from Prime.  There's nothing necessarily wrong with any of these strategic decisions, but if Amazon were to choose to establish a new tier, it would be an Eye-Opening pivot that would illustrate much about the company going forward.