The US firm Amazon disclosed on Friday that it spent $1.7 billion on video and music content in the first quarter, which puts it on pace to spend $7 billion this year. The report also included Amazon Prime membership program, which increased from $1.5 billion from a year earlier. Amazon is competing with Netflix, Hulu and a small group of other companies on the video side and with Apple and Spotify on the music side – these are just some of the areas that Amazon has shown interest in – aiming to take market share.
Amazon has told shareholder that it expects to ramp up spending in other areas like physical stores and grocery delivery. On Thursday, Amazon announced that it will invest another $800 million in speeding up shipping for Prime members. This proves that a well run company can find customers to sell new products to and improve on the current customers with a wide range of products.
Some analysts believe that Amazon will continue to provide content, even expand. “While I think it`s not the best use of Amazon capital, I do believe they will continue to ramp up investments to hold pace with Netflix, Disney and Apple.” These were the words of Gene Munster of Loup Ventures, CNBC was the source of this article. Even with the explosive spend on new products, Amazon is showing record profits, reporting $3.56 billion in net income, its most ever, while cash balance jumped to a record $47 billion. The growth of Amazon Web Services has made it, what one analyst Anthony Chukumba calls, “a profitability machine.”
The store spend promised and the content spend seems to be confusing to some investors, but the firm is increasing revenues across the board so there is time for the company to adjust and map out its future – better articulating this to investors.