Amazon takes profit hit to deliver homemade TV shows

Profits at the world's largest online retailer dropped by 37% in the first quarter, despite climbing sales. But it's all in the long-term plan...

by Michael Northcott
Last Updated: 30 Aug 2013

The maker of the Kindle e-reader devices has posted profits of $82m (£53.1m) in the first three months of 2013, which is a massive drop of 37% from the $130m it earned in the same period last year. But the weird thing is, revenues rose by a more-than-healthy 22% to $16.07bn. So what the hell’s going on?

Well, the firm has been investing very heavily in a few central tenets of its business. Its vast distribution network (those cardboard Amazon packages are seem to grace almost every letterbox in the country these days), its website and its ever-more-advanced Kindle tablets have all received a lot of attention. 

Furthermore, the company is planning to start producing its own TV shows. That’s right: it is currently preparing pilot episodes of 14 of its own shows to air on the website, which will be free to check out for audiences from the US, the UK and Germany. Those who do give them a go will be able to offer feedback and vote on which ones should be fully commissioned for more episodes.

Chief executive Jeff Bezos said: ‘The pilots are out in the open where everyone can have a say. I have my personal picks and so do members of the Amazon Studios team, but the exciting thing about our approach is that our opinions don't matter. Our customers will determine what goes into full-season production.’

It seems an odd decision for a company that started life as an online bookstore. But with the advent of tablet PCs, owning your own media (and thereby sidestepping expensive licensing fees to the likes of Rupert Murdoch’s News Corp), is becoming increasingly important. It will be interesting to see if the shows are any good. Rest assured MT’s reviews won’t pull any punches…

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