Dissecting Amazon
Amazon is so damn annoying.
Oh, it’s not that they’re a competitor and want to put both me and book publishers out of business so they can sell crappy books cheaply as some sort of book monopoly (though that sucks, too) — no, it’s the half-assed reporting of their financials.
Here, go to their annual report [pdf] and skip all that introductory crap that makes them sound good, go down to page 25: there they list a summary
Net Sales
– North America: $12,828
– International: $11,681
Consolidated: $24,509
(in millions)
…and that’s it. Oh, but there are more tables and numbers to go, obviously we just need to read down a bit… ah, here it is on page 28, “Supplimental information about our net sales is as follows:”
Net Sales – North America
Media: $5,964
Electronics and other general merchandise: $6,314
Other (1): $550
Total North America: $12,828
Numbers still in millions, and that footnote (1) reads “Includes non-retail activities, such as marketing and promotional activities, Amazon Web Services, other seller sites, and our co-branded credit card agreements.” That’s worth noting, in fact, as it would seem amazon makes a half billion off of ‘non-retail’ — I wonder how much of that is from ad revenue off of the ads that cover each and every Amazon page — sheesh, I know they’re in it for the money but it went way past tacky two years ago…
Anyway, their whole retail operation, close to 12.3 Billion Dollars, is summed up by those two categories: Media, and not-Media.
Real helpful, guys.
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All I’m interested in is Books, so I’m going to have to independently re-create a media number and then work backwards to figure out just what Amazon is selling.
Sounds easy, right?
My go-to source for numbers on publishing is The Association of American Publishers, a trade group that among other things, puts out monthly sales numbers broken into a dozen different categories and posts the figures to their web site.
That’s what I’m talking about. For 2009, they reported sales of $23.9 billion.
That’s an awfully big number, and it includes things like college textbooks, $4.3 billion all by itself. El-hi (a book publishing category that encompases the other big text book market, grades k-12 — elementary to high school, hence the abbreviation) is even bigger, $5.2 billion. For a back-of-the-envelope calculation, I’m going to take those out. Call it an adjusted trade book total: $14.4 billion.
So what else is “media”? Well, there are CDs and Music, DVDs, and video games.
For music, I found this release [pdf] with the year end 2009 Neilsen MusicScan statistics in it — though it lists units sold for 2009, not dollars. That’s OK. I figure 99¢ a track on downloads and $10 an album and with the barest gloss of extra math: that’s music media sales in 2009 of roughly $4.9 billion.
Not bad for an industry that’s going out of business, and that doesn’t include concert ticket sales, music licensing, prestige vinyl, or international sales. Just a ballpark number.
For DVDs, I found the Digital Entertainment Group, another trade association. Their members include just about every manufacturer and distributor of both DVDs and Blu-ray, and while they have an annoying flash site that doesn’t allow me to link direct to their numbers, they also have some pretty good numbers on the industry (including some yummy historical data going back 11 years, so you can watch VHS die all over again!)
The DEG figure for DVD, Blu-ray, and Digital Downloads is $20 billion. Down a bit, actually, from 2008 — it’s a lot closer to the 2003 total — but hey, we all knew sales were down. Unfortunately, this also includes money made off of rentals, so we’re going to have to back down a bit from the ‘headline’ number. DEG’s report cites Rentrak Corporation’s estimate for rentals in 2009: $6.5 billion. That puts DVD & Blu-ray retail sales at a still healthy $13.5 billion.
The final chunk of media is video games. Here’s an msnbc.com link posting the Associated Press article that quotes numbers from research firm NPD Group for 2008 — not as handy, as I need 2009 numbers, but it gave me the breadcrumbs I needed to find this press release from NPD Group itself, which not only has the total number (including hardware), it breaks it down a bit further into just what I need: Game software sales for PCs, portables, and consoles at $10.5 billion.
So “media” as Amazon reports it had total sales in 2009 of, well, let’s all do the math together:
(numbers in billions)
Books: $14.4
Music: $4.9
DVD/Blu-ray: $13.5
Games: $10.5
Total: $43.4
That’s U.S. only, but is made up of industry-wide estimates for each category. $43.4 billion.
Amazon, out of their big $25 billion gross sales number, only does $5.964 billion in US Media sales. About 13% of the total. Nothing to sneeze at, but not much to crow about either (else Amazon would have already done so: they’re secretive about some things —but not shy)
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So, what else can I do with this shiny new “retail media sales” estimate?
Well, books may be old fashioned but they are still a third of the retail media market. Music is 11% (about a ninth), DVD/Blu-ray at 31% (close enough to also call a third), and Video Games are 24% of the total.
We could also have some fun doing different types of analysis (Game Stop, for example, sold $795 million in new games in 2009, so even a solid “market leader” in a category only manages 7% or so of the total business) but my focus today is on Amazon, and books.
Let’s assume that sales on Amazon are proportional to overall sales: that is to say, of the $5.964 billion in “media”, a third is books, a third is DVD/Blu-ray, a ninth is music (CDs and downloads) and the rest is video game software.
Look at your own purchasing history — from Amazon in fact, if you’ve bought anything from them this past year — and also remember the figures above are all dollars, not units:
- a handful of books, at $12 or less?
- a TV series box set (or two), at $20 or more?
- two or three albums, when they advertise those $5 downloads?
- any games? maybe so, if it was discounted enough, and you didn’t just go to Wal-Mart when they had it on sale.
It’s nearly impossible to say — which is kind of why I wish Amazon broke it out in their own reporting of financials — but in the absence of real data, I’m going with my best guess and this assumption:
Amazon is so big, I’d be more surprised if their sales didn’t mirror the overall retail market as a whole, particularly in sales of books and discs: easily shippable but occasionally hard to find physical media. It’s what they built their core business on, a decade ago.
As a number of industries turn digital, well, so is Amazon. I’m not sure if it’s enough to move the needle one way or another. So what if I end up being off by half-a-billion dollars or so? It’s not like anyone else is posting numbers.
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Taking a leap in the dark, I think we divide up Amazon’s media sales proportional to the overall retail media market:
(in millions)
Books: $1,978
Music: $673
DVD/Blu-ray: $1,855
Video Games: $1,442
…but that video game number just looks wrong. Maybe with hardware added in, maybe, but the media calculations above specifically excluded hardware.
Gah! I hate Amazon!
Let’s say Amazon sells just as many games as they sell music? I’m on my third assumption, now:
(in millions)
Books: $2370
Music: $670
DVD/Blu-ray: $2240
Video Games: $670
I think the best we could manage is a range: Out of close to 6 billion in “media” sales Amazon earns between 1.8 and 2.5 billion dollars from sales of books, and about the same amount off of DVD & Blu-ray.
To make the math easier for my next post, I’m going with an even $2 billion.
