Amazon looks to delivery to boost Prime but promises more investment in content

Amazon is seeking to bolster engagement with Amazon Prime, which includes its video and music streaming offerings, with an improved shipping service.

Brian Olsavsky

The company has also changed the way it accounts for expenditure on original video in a way will reduce its impact on cost of sales.

Speaking on the e-commerce giant’s Q1 earnings call, CFO Brian Olsavsky said that Amazon was “very happy” with engagement levels for its overall Amazon Prime offering, without giving details. He said that engagement in Prime’s benefits, including shipping, hours watched on video and hours listened to on music, were “all trending in the right direction and continue to get more sticky”.

However, Amazon’s main move to reinforce Prime in the next quarter will be evolving its free two-day shipping programme to a free one-day programme, which Olsavsky said was “a big investment” for the company.

Investor relations director Dave Fildes meanwhile said that Amazon would continue “to invest meaningfully in digital video”, which he described as “an area that we’re very excited about”.

Fildes said that Amazon is now accounting for spending on original video entirely as capital expenditure, whereas previously it only capitalised a portion of those costs. The net impact for Q1 was a decrease of about US$130 million to cost of sales, which he said would accelerate in the second half “in line with our production schedule as it grows throughout the year”.

Amazon and Google earlier this week announced that they were ending their long stand-off over providing each other’s streaming services on their respective devices.

In the coming months, the two companies will launch the official YouTube app on Amazon Fire TV devices and Fire TV Edition smart TVs, as well as the Prime Video app for streaming to Chromecast and Chromecast built-in devices.