Advantage Amazon as it hits symbolic trillion-dollar mark

Is it game, set and match to Amazon? What began as an online bookseller has become a giant of ecommerce, cloud computing and media, its activities stretching from advertising and content creation to hardware, physical retail and shipping services. And drones. Amazon has drones somewhere, lurking.

Last week, the company founded by Jeff Bezos became the second US tech behemoth after Apple to reach a trillion-dollar market capitalisation. Its crossing of that threshold was soon reversed and may yet turn out to be more symbolic of a tech stock bubble than anything else.

But at this moment in time it can hardly not be considered a reflection of Amazon’s staggering power. How big is Amazon? Queasily big, for some. And yet there is still so much capacity for it to get bigger.

Over the past two weeks, I have consumed more media on Amazon than on any other platform: the week before it achieved its trillion-dollar status, I had signed up to the cancel-any-time streaming service Amazon Prime Video to watch US Open tennis. Clearly, my trial-period contribution of €2.99 to the Amazon coffers must have made all the difference to investors.

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Prime Video is a nascent business in this part of the world, having only launched here less than two years ago and advertised on the side of Dublin busses rather more recently than that.

Ipsos MRBI research conducted on behalf of communications regulator ComReg at the end of 2017 quantified the extent of its streaming rival's head start: while 42 per cent of Irish households said they accessed Netflix, just 5 per cent say the same of Prime Video.

Sports rights

Both in the US, where Prime is more established, and the rest of the world, Amazon has chosen the time-honoured, Murdoch-approved method of expansion: spending money on sports rights. In the US, this means doing business with the National Football League. In the UK, it involved acquiring rights to 20 English Premier League fixtures per season from 2019-2020 (in the Republic, these games will be available from Irishman Mickey O'Rourke's Premier Sports instead).

Next year will bring increased focus in the UK on whether Amazon is any good at the sport thing or if it’s just going to barge in and upset everybody. Its performance will be seen as a portent of what the sports media market might look like if Big Tech starts spending money in earnest on crown jewels that were once the preserve of pay-TV companies and, before them, free-to-air broadcasters.

Prime Video’s rights in Britain and Ireland to one of tennis’s four Grand Slams has delivered a foretaste of what to expect. Editorially, what it delivered was not only as good as the tennis coverage of traditional broadcasters, it was better.

Curiously, what it got wrong was the on-demand stuff at which it should have been adept. The platform failed to serve up enough court options in the first few days of the tournament and proved hit-and-miss when it came to making replays available – something of a basic flaw for an event taking place in another time zone.

Fans without decent broadband were also understandably incensed that the rights were awarded to a streaming service that could stall on them at match point.

Vast network

But what was notable was the speed at which Prime Video seemed to be learning on the job. Prime Video might seem like a novice or a minnow in broadcasting terms, but it is supported by a vast network of inter-related businesses designed to help Amazon “own the home”. Alexa, replay that penalty miss for me.

Retail and media might seem like distinct businesses, but the manner in which both depend on locking in customer loyalty is much the same.

On Friday, Waterstones boss James Daunt, in lamenting the thorn of Amazon in his market, accurately summed up its power by noting it was “cutting the price of books so people will join Prime and buy a blinking Alexa, shoelaces and all the rest”.

Amazon hasn’t become the world’s most valuable brand (as judged by consultants Brand Finance) by accident, but through a combination of innovation, timing, aggression, kind taxation policies, and business practices that can feel unkind, especially to rivals.

One eye-catching though ultimately dubious story doing the rounds about Amazon in the past few days has been viewed as either evidence of its operational prowess, a dystopian glimpse of the near future, or both.

The company received a patent in 2016 for a system that would enclose its human warehouse workers in a “cage”, it was reported. The rather crucial context here is that the cage, which Amazon says it has no plans to use, would allow the human worker to safely enter robot-only zones to make repairs and correct errors. It was a protective device, not a prison.

But that the story surfaced at all is down to a long-standing unease about the scale of Amazon and the ultimate cost of its ruthless efficiency.