Amazon Gets All Twitchy

We have long argued about the logic of joining up the media dots. Some see this as merging the technology and using one technology architecture to deliver all services. Others see the services as remaining separate and simply offering a ‘one stop’ consumer umbrella, which collectively makes it difficult to compete with.

This week Amazon has acquired games streaming service Twitch for a cool $1 billion ($973 million). Twitch claims to be the fourth largest generator of peak load Internet traffic, which is greater than Hulu, Facebook and Amazon.  According to Twitch it has quickly become the go-to-platform for the fast growing video game-streaming market. In July they claimed some 55 million unique monthly viewers.

Amazon’s media offer now includes physical books, ebooks, singles, print on demand, rare and used books, audio books, lending and subscription services streamed music, CD music, downloaded music, film rental and streaming, games and game streaming much much more. When you recognise that these can all be offered under one subscription service, Prime, as either supplemental services or the main offer, the picture changes. Kids Free Time is the only service Amazon has collectively offered under one proposition and subscription, but it isn’t hard to see many more such offers. Prime also unlocks the world of Amazon’s marketplace, goods of all sizes and shapes and a growing digital offer and physical delivery service which has collection points, same day delivery and again much more.

So is about building a ‘one stop shop’ and owning the customer’s first point of choice and if Amazon hasn’t got it, then its marketplace probably has. This now begs the question of why we bother to search on other services and don’t just go to Amazon first every time. After all, we will be soon conditioned to believe that that’s where we will probably get the best deal on everything and anything. Amazon gets first crack at unlocking our purse and getting our money and if the sale goes elsewhere through marketplace then they still get a cut.

So what about media and content? We know Amazon wants to take out the middle man. It is also becoming a producer, publisher, commissioner and much more across many media forms and not just selling books, films, etc. Does it want to be the only one? That would not make sense and would be unrealistic, but it will go for the quick wins and importantly go to win the hearts and minds of the self-publishing and creative-direct route.

What we have is an omnivore, which in its habit is creating a compelling consumer and creator proposition which is hard to avoid. No one only reads books, watches films or plays games and fighting a beast gets harder when it’s not just about one offer. Importantly the sum of the parts is its strength and that is not just with consumers, but with its competitors. Competitors and providers who have only a slice of the offer, have just that, a slice. They have to do that not only better than Amazon, but better than the rest who are fighting for that space. Niche is fine and can be very profitable, but it is just niche and growth is limited.

If you want to grow outside of the niche you have to find others who can help replicate what Amazon is doing internally. That’s Amazon’s potential weakness in that it has brought its offer inside. The companies may well operate separately but they are owned by Amazon. To compete then someone has to collect the same, similar or others into a group that acts as one but who remain separate. There are many opportunities but often little or limited vision or appetite for co-operatives. 

  

To those who are searching for the synergy between Twitch and books and other media, forget it. The game is about creating a unique, compelling and universal offer and if it also provides some synergy then that’s a bonus.

Beating the Tin Drum

As far as the consumer is concerned is it the device, or the functionality it enables, or is it the content it can render that is ultimately the decider? Is it in fact cyclical and does the technology always come first, closely followed by the features and functions and the actual content come last, or are we now at a point of change?

Who today would buy, or even want the pre iPhone mobile? Was it purely down to the iconic design and presentation of the iPhone, or the apps it unleashed and app store? Would the device have been enough without the digital content?

We then have the drivers behind the major offers.

Apple’s iPod enabled iTunes to go mobile and was a phenomenal success like the Sony Walkman before it. But the iPod was nothing more than a mobile jukebox and when smartphones started to compete they needed to do more and the iconic iPhone was introduced. This masterpiece of design was king and spawned the lucrative world of apps and multimedia mobile. But again as Android replicated Apple’s offer they had to once again find something different - enter the iPad. The iPad was another winner and the true multi media player of choice but it wasn’t a phone and it wasn’t small enough to put in your pocket. Apart from the telephony the only real difference between the iPhone and iPad was size and in a mobile world the smaller size does matter too many. So when others started to introduce smaller tablets and larger smartphones the world started to change again.

Interestingly, the only real difference between many of today’s offers is the content and how well it renders of the device.

Some suggest that books are different and needed eInk dedicated readers. The reality is there are not and don’t. Amazon, Nook, Kobo have all adopted an increasingly agnostic device and operating system approach. This ‘platform’ approach is not dissimilar to all the major content services across all digital media. Today you can now play music, watch films and TV, play games, deal with emails, perform full office functions, access all media, community services and the internet on a device agnostic basis.

So devices are basically today’s fashion and quickly becoming tomorrow’s scrap. The apps are being developed for all operating platforms of significance, browsers are fully agnostic and content is available from all with everyone trying to mirror each other’s offer across all platforms. We now have the emergence of the super toys in the form of mobile watches, external snap on lenses and glasses, but is there no reason to believe that these will decide who wins and who losses? Some would suggest that they are a mere distraction and that, like so many before them, they do not offer sustainable advantage.

Maybe we are now entering the world where even the availability of media is not enough and it is the commercial package that will decide the winners. Perhaps the winners will not be the tin manufacturers, who as we have seen, now play on an increasingly level playing field, but the content packagers and community hubs who are becoming the ‘must haves’. Perhaps it’s those who have multi-faceted information on their community. This is where Amazon is scoring day in day out and where those who can design a place in their side lines can also survive. Amazon announced when it launched Amazon Matchbox that it had data on every book purchased since 1995 and I bet every search, basket and much more.

The latest rumour is that Amazon is about to launch a smartphone and give it away free within their service community. It isn’t such a farfetched idea and would certainly fire a shot across of the bows of the mobile technology companies who rely on selling units, be it to network providers, or direct. The shift would be from a device centric world where people watch the sales of smartphones to a service centric world where the consumer is attracted to who offers them the most convenience at the best price on whatever device.

As John Lennon once said, ‘ I may be a dreamer but iam not the only one.’

Amazon.com And You're Done

I remember in the late 90s siting in a strategy board meeting, where one director predicted that Bertlesmann would ‘crush ‘ Amazon and that the company would not last at the level of losses is was making. I tried to explain global branding, customer service, and how retail operations can work on positive cash flow, but I only got a glazed look in return. The outcome is now history.

It is hardly surprising to find that the media that Amazon started with, books, is one that they cover so well. It is the width and depth of Amazon’s book vision and commitment that makes it different. They proved themselves adept in understanding the market’s weaknesses and seizing on opportunities. As a result Amazon is truly vertical.

Who else has a significant if not major share of:

Physical books - Sales over the internet now includes The Book Depository and ABE acquisitions. Amazon remain one of a few who openly sell new books alongside, bargain, second hand and rare. They understand that to a consumer, a book is a book and that bookselling is about selling all books, not just front list.

Ebooks - Amazon not only rekick started the ebook market, but drove the consumer adoption of eink readers and later platforms. Although they still own Mobi, it is somewhat languishing in the background and we are not sure what happened to that other acquisition, Lexcycle’s Stanza reader. They have however created a market leading and global Kindle brand, which now transcends the device itself.

POD – Amazon acquired Booksurge. Although POD never fulfilled its potential to change the model from print and distribute, to distribute and print, Amazon still acquire content through this channel and it has also established their appeal to many authors.

Audiobooks – Amazon has this base covered with market leading and aptly named Audible.

Marketplace – Amazon’s service pulls in retailers, wholesalers and publishers and creates a place where Amazon may not be the cheapest but they still gets a healthy slice of the takings from each sale. A very clever move to create a service which everyone has to be in.

Singles - Amazon Singles may still be a bit lost but could easily find a home in their new Washington Post offer.

Digital Library – The Amazon owner lending library creates a new lending model which offers the consumer a new service and the author additional new income.

This is all without KDP and its successful self-publishing arm and also Amazon’s now serious and potentially disruptive moves into being a publisher. Did we forget that Kindle brand? Did we forget that umbrella subscription service, Prime?

To achieve the above in less than 20 years and do so across the globe is significant. Together it shows a clinical understanding of the value chain, book sectors and its supply chain that has to be admired. Amazon is truly a category killer.

Now add LoveFilm video streaming and DVD rentals, a very healthy CD Rom music retail offer and music downloads, the Washington Post, Amazon’s new Art offer and we see a media conglomerate that has subtly moved in and picked the industry’s ‘low hanging fruit’.

We must not forget all the other Amazon businesses. The range of goods it now sells is diverse and generates significant revenues. Here it services the same consumers through a single marketplace portal, offering a true one stop shop, or ‘Walmart on the internet’.

Then we have the technology that underpins all their services and like their cloud and web services are now being retailed in its own right. 

Amazon is here and is here to stay.

As long as they continue to provide that comprehensive cover, service and one stop shop, they will not be dislodged. Some may want to be number two or three, but it’s like chasing rabbits and their future will be determined more by Amazon’s actions and their ability to merely track them. We now need to learn to survive in an Amazon world. To do so we must innovate and do things differently and smarter and in doing so recognise that only the agile survive a category killer.  

Digital Platforms Are Strategically Changing

This last week we have seen three pieces of news which were all worthy of note but when taken together offer us an interesting insight into the strategies players need to adopt moving forward. Today is no longer a case of simply having one compelling offer or thinking that you own a slice of the market. Tomorrow will be won by those with broad appeal and that add real value.

First there is the launch of BT’s digital sports television service. We already have a saturated market in the UK with players such as Sky dominating. Taking on Sky with a straight head to head offer would have been yesterday’s approach, would have probably resulted in a bloody price war and could have been an expensive failure. So BT bid a won some significant rights to live sports including some 30 Premier soccer matches but how would they use these to build their consumer base?

The answer is now out, they will effectively give it away on the back of their broadband service. Those that subscribe to their broadband now get free access to live soccer over the internet. This not only captures the heart and minds of soccer fans who up to now have to buy it as a secondary added service but introduces that magic consumer word ‘free’. Consumers can pay an extra subscription to BT and get it delivered onto their TV through a set top box in HD but many will happily watch on their tablets, laptops and even smartphones.

BT has not only slapped Sky across the face but it has put pressure on those broadband providers that have been eating away at their business. The move reinforces BT broadband services and is a smart move.

Second we have the news / rumours that Microsoft (MS) are about to splash out $1billion to fully acquire Barnes and Noble’s Nook digital world. The hardware is already being phased out and discounted and the partnership / joint venture that offered so much is now being taken over by the Seattle giant.

This would bring MS into the media battles again. Remember Zune that music competitor to the iPod, or their latest damp squib Surface, the tablet that choose the wrong operating system – again. Microsoft has a track record of getting things wrong and playing catch-up. However when they do acquire a readymade solution such as SKYPE they can screw up over engineering something that didn’t need the attention. Try accessing Skype today on Windows 8, through a browser or on an Android smartphone and you would think you were connecting with three different applications.

So what will Microsoft do with Nook? Maybe they will focus on education, but exactly what will it give them? Perhaps they believe that they can take on Amazon but do they really understand media or just bits and bytes? It’s a great financial exit for Barnes and Noble but what’s in it for the consumer?

Thirdly we have the rumours that Amazon is planning to launch its own smartphone.

We often ask what is amazon. Is it a media retailer, a publisher, a one stop shop, a marketplace, a technology company? The answer is probably all the above but primarily it’s a community hub that attracts many through not one but many offers and its quality service.

So why a smartphone? Well it’s an obvious extension of its hardware offer and remember when Apple went into the phone business we asked the same of that move. Unlike Apple it doesn’t need to plough its own furrow and can piggy back on a wealth of technology already out there. Maybe like BT it sees a way of being able to offer primary services with added value additional service that effectively lock in consumers.

Tomorrow is not about the best device, the best product offer, the cheapest price, the widest range, the fastest connection. It is about the best holistic offer that adds real value and is built around a primary driver.

Amazon Kindle FreeTime: ‘Give me a Child……’

Amazon have once again shown their astute marketing awareness, ability to drive the market and have announced Kindle Freetime Unlimited. FreeTime delivers what it says on the can and serves up unlimited access to thousands of preselected books, games, apps, movies and does so by a monthly subscription. The target audience is in not adults, or the teens, but young children aged between 3 and 8. The service recognises who owns the purse in this area and offers full parental control. The service itself is tied to the new Kindle Fire and what is fast becoming a pivotal tool and marketing differentiator and jewel in the crown, Amazon Prime.

So parents can now by a single subscription give their children access to thousands of digital materials. No more having to buy individual books, films, games, just one monthly subscription gives the children hours of entertainment. No ,more do parents have to be worried what their children can see or how they spend their time as parents are given full control. As an appetiser Kindle Free Time now comes for one free month with every new US Kindle Fire and FireHD.

So Amazon have not only created the service, locked it to Prime but also are to make the service available to all to be sampled by every parent who buys a Fire. If the children and parents like what they see, they can simply convert to the full service in ‘one click’.

The service is not exclusive to Amazon Prime users, but they benefit by a substantial subscription discount. The service is $4.99 a month for one child without Prime and $2.99 with Prime. Up to 6 children can have access for $9.99 a month, but again enjoy a discount with Prime with the subscription dropping to $6.99. So FreeTime starts to become a 'no brainer' for Prime parents and could add that extra value to convert parents to Prime and for them to enjoy the benefits of the overall Prime service. This use of a ‘blanket service’ offer that ties added value benefits across many of the Amazon services is a very clever and effectively starts to further lock in customers to Amazon and becomes an added value attraction to attract more consumers to Prime.

FreeTime will serve up only hand picked content and media which itself assures parent that material is controlled. Freetime is itself attractive to content providers who don’t want to miss out on this audience. No other book publisher or retailer can easily match the overall offer. So it becomes a double lock in.

 Amazon has built in parent controls that enable them to set limits on categories such as video and games, appealing to parents sensitivities and enabling them to give their children more time to read. Parents can also build individual child profiles which can control what each child can access and the time that they are on the individual service elements. Gone are the dry industry based categories and book shelves,  the content is design to engage children with colour, graphics and child orientated navigation. Amazon is making the digital book work and not simply creating wizardry.

By starting with young children Amazon have also played another clever card.  It starts to enrich its appeal to parents, adds even more value to Prime and importantly creates a model which can be easily reproduced to appeal to older or specialist groups, or even grow with the young user, appeal to the educational market and become a ‘must do’ for content providers.

In the words of the Jesuits, ‘ Give me a child until the age of seven and I will give you a man’.  In the words of Amazon, ‘Give me a child until the age of eight and I will give you a family of Amazon customers for life.’

The Power Of The Amazon Prime 'Club'

In 2002 Amazon launched its Free Super Saver Shipping program Amazon offering free shipping on orders over $25. In 2005 Amazon launched Amazon Prime, which for an annual fee of $79 gave its’members’ free two day shipping on all you can eat. Initially, many may have questioned the value of the service but Amazon has continued to add value its its club and now has built a very substantial membership which obviously keeps coming back to Amazon for more.

Amazon Prime now offers over 15 million items that are eligible for the service, Prime Instant Video, which is free to members offering over 22,000 films and tv programmes on demand and adding the Kindle Owners’ Lending Library, which has now grown from some 5,000 books to over 180,000 that can be borrowed for free with no due dates. Prime remains just $79.

Amazon now has announce that it ships more items with Prime Free Two-Day Shipping than with Free Super Saver Shipping and they have built a club and member loyalty which will become increasingly self fuelling. Amazon Prime is a marketing work of genius that its competitors will struggle to compete with. They may offer free shipping but in doing so stand to the total cost, they may offer free on demand film downloads but only have a film service and not a media service. They may only offer digital and have a limited range compared to Amazon’s.  more and – the program Amazon launched in 2002 that offers free shipping on orders over $25.

Amazon is building a significant ‘club’ and differentiator which not only is hard for others to follow but potentially protects Amazon from sudden attack by building a ‘first choice’ or preferred port for its customers. Importantly they can now build new services which can be offered to Prime members and the Kindle lending is a clear example of this. Effectively what started out as a postal offer has morphed into a subscription club, on line library for film and ebooks and could be easily plugged into other services.

As others improve their offer Amazon may well loose some share in individual markets but they are growing a bigger market share across several markets. This in turn will become more appealing to many and offer value and a one stop shop.  

Amazon has displayed and continues to deliver first class value and customer service and it is these qualities that others such as Barnes and Noble, Kobo and Apple must grapple with

Can You Define Tomorrow's Digital Library?

Today we have two separate but interlinked news articles on libraries. Declining spend, visits, issues, stock, staff numbers would all send out alarm bells to most businesses let alone libraries today and the news that the biggest industry player has now launched its own ebook lending library would certainly heighten the alarm bells.

It’s just under a year since we wrote an article ‘Public Libraries: Back to the Future’. The article was about the history of the public library and changes that it now faces in the 21st century. This article was different to the many others we have written, in that it focused on the changes that libraries have gone through both in their funding and their membership and its concluding comments questioned why tomorrow should be the same as today and remain unanswered :

Many would go on blindly demanding on the universal right to 'free' and that the funding by public funds must be a given. However, some would now suggest that this needs to be seriously questioned if we are to avoid the questionable digital position adopted by the UK PA over electronic access, the handing over of public assets to Google and the potential challenges of digital subscription/circulation libraries outside of the public control. Could Amazon or Google Editions become the new digital subscription / circulation library?

First, despite the high profile activity to save UK public libraries, we have a report from the UK Chartered Institute of Public Finance and Accountancy (CIPFA) that states a 2.3% drop in spending across the service of from £1.19bn to £1.16bn. Book acquisition drops included; adult non-fiction, down 13.7% to 2.36m, Adult fiction down 7.4% to 4.58m, children's fiction down 7% to 2.92m and children's non-fiction down 5% to 659,000. The total book stock held by libraries also dropped from 99.2m to 98.3m and the number of libraries also dropped from 4,612 to 4,579. The decline also hit the number of overall visits to libraries which dropped 2.3% to 314.5m and book issued, down 2.9% to 300.2m and even the number of web visits to libraries, which had risen sharply over the previous four years, dropped from 120.4m to 114.8m.

The CIPFA report also stated that the total number of volunteers in UK libraries had risen by 22.3% to 21,462 people whilst the number of library staff had dropped by 4.3% to 23,681 over the same period.

As we face the digital challenge with declining spend, visits, issues, stock, staff numbers we have to ask whether public libraries as we know them today are sustainable.

Secondly, we have the launch of Amazon’s Kindle Owners' Lending Library, which allows ebooks to be borrowed by US Prime members and read on all Kindle E Ink and Fire devices. Prime began as a membership offer for package-shipping benefits and costs $79 per annum and has now added video-streaming with some 13,000 movies and TV shows to members as well as ebook lending. Prime members will only be able to borrow one book out at a time for up to a month and any Notes, highlights and bookmarks made will be saved even when they return the book. When they want to borrow a new book the old book is effectively removed.

In September Amazon entered in agreement with Overdrive to make Kindle titles available to libraries and already libraries claim that the impact of this has been significant in the US.

Amazon claims that Kindle Owners' Lending Library will offer "thousands of books to borrow", but today these will exclude titles from the major trade houses, who have refused to join. Amazon appears to have reached a fixed fee agreement with other publishers and is claimed in some cases to be purchasing a title each time it is borrowed by a reader. Some would suggest that to grow the service in the short term Amazon doesn’t need the major Trade Houses and if like everything else they have pioneered they get it right the major Trade House will need them or an alternative in the long term.

Libraries serve communities and promote reading, learning and have been at the heart of society over the years. However as public libraries come under increasing fiscal squeeze their current business model may also come under increasing pressure.

CIPFA Press Release and report
Amazon Owners' Lending Library
'Amazon Overdrive potentially lock up libraries', Brave New World April 2011
'Freeing eLibraries to Compete', Brave New World March 2011
'Public Libraries: Back to the Future'. Brave New World December 2010

Amazon Prime Head to Head With Netflix

Amazon has announced the launch of new video streaming service that gives Amazon Prime members unlimited, commercial-free instant streaming of more than 5,000 movies and TV shows. Previously the Amazon Prime service was about offering free shipping irrespective of the purchase price for just US$79 per year. Now for no extra charge Prime members get the new service effectively for free and Amazon is even offering a one-month free trial of Prime to non members. This is creative cross selling and creation of a premium media and shipping service.

The movie and TV show content can be instantly accessed on Pcs and some 200 Internet connected TVs, Blu-ray players and set-top boxes.

Netflix now is clearly in Amazon’s sights and although its streaming catalogue is considerably larger Amazon's overall catalogue for rentals and purchase exceeds 90,000.

The combination offer of Prime and streaming services could not only kick start the new service but will ultimately boost sales of physical and digital products. It is a clever strategy which may be restricted today to the US but points to what they can do with their recent LoveFilm.com UK acquisition.

Amazon is now laying a cross media and cross border architecture which could be very attractive and even negate them the worry of the toll booths that Apple has misguidedly erected. It is feasible that Amazon can now extend streaming to music, ebooks whatever and I doing so create a premium service for all.