Memberships for Amazon’s subscription service Prime, which offers two-day shipping, allows users to stream movies, TV shows & music, and also store photos, has grown 53% year-on-year (YoY) in Q4 2014 globally, while in USA it has grown about 50% YoY, Amazon chief financial officer & senior vice president Tom Szkutak said during the Q4 2014 earnings conference call. He however mentioned that in terms of the number of Prime members US is still well ahead of the global numbers. Incidentally, Prime recently completed 10 years.
Answering an analyst question, Szkutak also mentioned that among users who opt for the 30-day free specifically to get access to the video content on offer, the rate of conversion to paid Prime members is much higher than users who look for any of the other offerings. The subscription renewal rate is also higher among users who are predominantly streaming movies & TV shows through Prime. Last year, Amazon had invested $1.3 billion on the Prime Instant Video app that allows users to stream movies & TV shows available as part of the Prime service.
Readers will remember that last month a The Economic Times report had mentioned that Amazon is looking to bring its Prime service to India later this year, but hasn’t finalised a date yet. Amazon’s competitor in India, Flipkart had launched an annual subscription service similar to Prime called Flipkart First, in May last year.
On Investments in 2015: Szkutak mentioned that they will continue investing in their Web Services Business (Amazon’s cloud computing services business) to support its growth. Szkutak also expects further investments in Fulfilment By Amazon (FBA), through which Amazon provides third-party merchants access to its logistics & customer care services. The number of Amazon sellers using FBA grew by more than 65% year-over-year in 2014. In Q4 2014 FBA units represented more than 40% of total third-party units sale.
On India opportunity: Answering an analyst question, Szkutak said that they have a good team in India, are investing aggressively and that it looks like an interesting opportunity. However, he mentioned that it’s too early to point what advantages Amazon might have over its competitors in the country, in terms of leveraging scale. Amazon claims to offer over 19 million products on its India site from over 16,000 sellers.
Other operational highlights
– In December last year, Amazon launched the Prime Now service, which offers paid one-hour and free two-hour delivery for thousands of daily essentials via a new mobile app. This service is currently only available in Manhattan.
– Last month, Amazon had picked up about 15% stake in Bangalore-based QwikCilver Solutions through its Singapore-based subsidiary Amazon Asia Pacific. This was probably a strategic investment, as it gives them access to QwikCilver’s semi closed wallet system that will allow Amazon to offer customers a digital wallet service for purchases from the site. QwikCilver had received a 5-year prepaid mobile wallet license from RBI in August 2013.
– Amazon India launched a musical instruments & professional audio equipment store, an office & stationery supplies store, and a precious jewellery store over November and December last year.
– In December, Amazon India & Microsoft tied-up to launched an online branded store. This store features the full range of Microsoft products, including the Lumia and Nokia mobile devices, Windows phones and tablets, Xbox One and Xbox 360 consoles, games and accessories, software and other accessories.
– The online marketplace had partnered with the Label Corp to sell the latter’s collections from thetrunklabel.com and theclosetlabel.com on its platform, in November last year. (Also Read: A look at Amazon India’s fashion foray so far)
Amazon reported net sales of $29.33 billion during Q4 2014, up 15% from $25.59 billion in Q4 2013. However, net income was down 10.5% to $214 million in this quarter, from $239 million in Q3 2013. For the 12 month period ended December 31, 2014, net sales was up 20% to $88.99 billion, as compared to $74.45 billion in 2013.
Amazon reported a net loss of $241 million for the year 2014, down 12% from $274 million loss reported in 2013. Amazon’s media business revenues for Q4 2014 stood at $6.95 billion, marginally down by 3.87% from $7.23 billion in Q4 2013. And revenues from electronics & other merchandize business stood at $20.64 billion for the quarter, up 17% from $17.13 billion in Q4 2013.
Change in reporting format: Starting from Q1 2015, Amazon expects to change their reportable segments to report North America, international and Amazon Web Services.