AMZN Q4/YoY: sales way up; may raise Prime price

AMZN Q4/YoY: sales way up; may raise Prime price

I always find the Amazon financials interesting, and this was no exception.

press release

Looking at Year over Year (YoY…comparing 2013 to 2012), Amazon says

“Net sales increased 22% to $74.45 billion, compared with $61.09 billion in 2012. Excluding the $1.28 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the year, net sales grew 24% compared with 2012.”

22%! That’s amazing!

Income was also way up, cash flow was up, and so on…this is a shining report!

During the call, they mentioned that Prime has been $79 a year since its introduction about nine years ago. Shipping costs have greatly increased…but the price hasn’t.

They said they are looking at increasing the annual price of Prime $20 to $40.

You can hear the recording at

http://www.amazon.com/ir

The Q&A (Question and Answer) part of the call is the part I most like to hear…and this time, the vast majority of questions were about the possible Prime increase.

Prime appears to make Amazon a lot of money (through increased sales and loyalty)…why would they risk changing it?

First, I think they are right if they think this won’t lose them a lot of Prime members. Make it $99 a year, and we’d certainly still do it. They could do that (as was suggested by a caller) by making it an installment plan (maybe $25 a quarter). They could also tier the services: allow you to buy the shipping, Prime Video, and KOLL (Kindle Owners’ Lending Library) separately.

Second, this could be a big chunk of change…and quickly, over the course of a year.

They reportedly have tens of millions of Prime customers. They may not all be full price members, but let’s just say there are ten million, to be very conservative.

Ten million people paying $20 more in a year is a $200 million difference…Amazon could do some very interesting things with an influx of cash like that, even if part of it offsets previous expenses for Amazon for Prime.

The day’s change for Amazon stock? Up 18.81, 4.9%…

Happy ending?

Well, you know Wall Street…at least, you may know it better than me.😉

In after hours trading, the stock was “tanking”, according to this

USA Today story

You see, although they did really well, they didn’t meet “expectations”. Is that Amazon’s fault…or the fault of the people whose expectations were too high?😉

Again, interesting stuff…feel free to comment.

This post by Bufo Calvin originally appeared in the I Love My Kindle blog. To support this or other blogs/organizations, buy  Amazon Gift Cards from a link on the site, then use those to buy your items. There will be no cost to you, and a benefit to them.

15 Responses to “AMZN Q4/YoY: sales way up; may raise Prime price”

  1. Tuli Reno Says:

    I would probably be one of those people to quit Prime. I’ve been using it for many years, but I rarely use the video service or the lending library and I don’t shop as much as I used to.

    • Bufo Calvin Says:

      Thanks for writing, Tuli!

      Certainly, there would be some people who make that decision…but my guess is that it would be a small percentage. I suspect they might lock up some video deals, in particular, and perhaps in conjunction with a set-top box or TV gadget of some sort, that would change people’s mind on it. Expanding AmazonFresh in a way tied to Prime would also help lock people into it. A subser (subscription service) for books would also appeal.

  2. Jennifer Jeffreys Martin Says:

    $99 would be okay with me, although I am an old person on social security. It’s still a great bargain.

    • Bufo Calvin Says:

      Thanks for writing, Jennifer!

      That would be one of the thoughts people would have: it might cost more, but still save more than it costs to have it.

  3. Deb Schmalz Says:

    Yikes! If Prime is increased I’ll sure keep it although I ‘m on Medicare. I hate it but I’ ll have to keep this quiet from my hubby. Got to cut somewhere, $25.00 a quarter would certainly fit my budget better.

    • Bufo Calvin Says:

      Thanks for writing, Deb!

      Yes, I think structured payments (rather than smaller-chunk subscriptions…that would be paying for a month or a quarter at a time) might work for a lot of people.

  4. Diane Says:

    Any chance prime might also include certain rentals on audio books?

  5. Zebras Says:

    Hopefully they are saying up to $40, so that when they raise it $20, it won’t be such a shock. I will definitely analyze more closely if its worth it for me if they do a significant raise.

    • Bufo Calvin Says:

      Thanks for writing, Zebras!

      I do believe that’s quite likely. It wouldn’t be a good thing to underestimate the possible raise…so stating a higher end price will get people talking negatively initially, but then seem it will be a relief for people if it isn’t that much.

  6. Edward Boyhan Says:

    I too listened to the conference call. I was amused how it seemed that just about every questioner was probing on the prime price increase — it really sucked the oxygen out of the call. They did address obliquely the additional income from a prime price increase. Prime just costs more to provide and the growth in membership isn’t helping on the cost side either. I suspect they’ll sweeten the Prime pot in conjunction with any increase. The bruited increase would only be for North America.

    Other interesting tidbits: while AWS is lumped in with the “Other” segment, they did point out that AWS growth is greater than the growth presented for the “other” segment.

    One of the last questions had to do with long term financial objectives: revenue growth or net income growth? Answer: maximize free cash flow while improving customer service. Free cash flow had taken a hit in the past few quarters (partly due to the expense of their new HQ in Seattle). Thankfully free cash flow has recovered nicely, and is a little over $2b BN.

    As is per usual with Amazon it doesn’t matter what they report (income growth or a loss) the stock always falls in immediate after hours trading (off 10% today), but usually recovers in a day or two. It’ll be interesting to see whether that pattern repeats.

    Unlike previous calls there wasn’t too much about “investing for growth” — all in all a pretty uninformative call (even for the normally uninformative Amazon).

  7. John Says:

    I wondered if Amazon might add a streaming music service like Pandora as part of increasing the price for Amazon Prime, or a small discount to Prime members when renting new releases. Bundling a new service with a price increase would be like a spoonful of sugar to help the medicine go down. 😉

  8. Bob anton Says:

    Never say never! Would I stay? Maybe if more is offered and the raise is not over $20.00.

  9. Angelo B. Says:

    Bufo, this proposed increase to the price of Prime is sad news. A $40 bump is more than 50%! What business thinks it can get away with a 50% price increase? It would also create a lot of ill will toward Amazon, I believe. As much as I love Prime, I am not paying 50% more! I rarely use the KOLL, there are plenty of alternatives to Prime Video (not my “go to” video source anyway), and I’ll learn to wait until reaching the minimum order amount for free shipping and a few extra days to receive the order. Bottom line is that I’ll spend less, probably much less, at Amazon if they chase me away from Prime. I have a feeling that a huge percentage of other Prime customers feel the same way.

    • Bufo Calvin Says:

      Thanks for writing, Angelo!

      Well, this is the first increase in 9 years. So even at 50 percent it would be less than 5 percent per year. I do agree with one of the other people who commented that they may be saying $40 but really planning on $20.

      I do think that there would be a percentage of Prime users who would feel the way that you do, but I don’t think it would be a huge percentage.

      Maybe I will poll my readers…

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