Cost Cutting at Amazon: Alexa gets a tighter budget.

[davideduardo]

Amazon has lost about $8 billion on Alexa. So it is cutting back in the developing recession economy.

"Amazon’s devices business has long been an arm where the company innovates and was celebrated by its founder and former CEO Jeff Bezos, who made Alexa his pet project. The unit has had more than 10,000 employees and is a major recipient of investment capital.
While Amazon has said it remains committed to Alexa, Mr. Jassy has targeted businesses that are losing money."

Amazon Set to Lay Off Thousands of Corporate Workers (this may be behind a firewall)

This is another example of new media that consumers lobe but which have yet to find a path to profitability. And, since Amazon devices have replaced stand-alone radios in over a third of all homes, this financial hold on the product may have a relationship with radio.

 

[TheBigA]

This is another example of new media that consumers lobe but which have yet to find a path to profitablity.

There are two things going on here. First, they over-expanded. They wanted to cut the delivery time between when customers buy products and when they're delivered. So they built a lot of new warehouses to cut delivery time. Then they staffed those new warehouses, and the staff unionized. So that's one problem.

Then they spent tons of money on various streaming services. That's the part that fits what you said. Amazon Prime was a simple idea that has become way more complicated, and every time they add something to it, it loses money. Creating new content is expensive. They also have something that's part of Amazon Music called Amazon Radio. People may not know about this because it's just another part of Amazon:

https://music.amazon.com/stations

These are staffed & curated internet radio stations that stream on Alexa. We have no way of knowing how many people use these things, but if Apple is any indication, the answer is not very many. But Amazon pays for the staffing and operation of these stations that are free to Amazon Prime subscribers. Then they increase the price of Prime, and subscriptions drop. That's how to lose a billion dollars.

But yes, all of these big tech things that were once free may now carry new prices. Twitter needs to replace declining ad revenue. Facebook is also dealing with ad losses. Amazon, Google, Pandora, all having to reassess their business model, and at the end of the day, that may lead to increased fees for consumers. I said this a long time ago: Streaming music used to be cheap. But every day things happen that are making it more expensive. It might be increases in royalty fees. It may be losses in ad revenue. It may be just basic mismanagement, which may be a part of what happened at Amazon. But all of those things are going to have an effect on the future of streaming. The free ride appears to be over.

 

[davideduardo]

But yes, all of these big tech things that were once free may now carry new prices.

And that is a tough call as we enter what nearly every financial advisor and analyst are calling a "mild recession" that has as it most visible symptom enormous inflation and COL hikes.

 

[TheBigA]

And that is a tough call as we enter what nearly every financial advisor and analyst are calling a "mild recession" that has as it most visible symptom enormous inflation and COL hikes.

People are deciding how many monthly bills they want to pay. When people have to choose between gas for the car, heat for their home, and their Amazon Music subscription bill, something may have to go.

 

[davideduardo]

People are deciding how many monthly bills they want to pay. When people have to choose between gas for the car, heat for their home, and their Amazon Music subscription bill, something may have to go.

Those of us that use Amazon instead of going to the store, of course, get huge savings on Prime.

Were I to pay an average of $10 per delivery for merchandise, I'd spend over $3,000 a year with Amazon. Between the pandemic and tightening of inventories at retail, there are just too many "don't have your size" or "item out of stock" or "don't have anything like what you want" instances to go to the store for much of anything any more.

What is expensive is the sum of cable, FiOS internet and all the premium choices. I can see families making difficult choices, particularly as we witness a trend by the "networks" to move original programming to paid streams instead of OTA services.

 

[TheBigA]

Those of us that use Amazon instead of going to the store, of course, get huge savings on Prime.

Huge savings to you mean lower profits for them. On any given day I see the Amazon Mercedes Van driving through my neighborhood delivering packages. They seem to be here several times a day. That to me is inefficient. I have a relative who does deliveries for UPS. I described this to him, and he says it's bad planning. UPS has a computer system that makes sure his route is efficient, and he delivers to places based on geography. Apparently they don't do that at Amazon. Perhaps another reason why they lost so much money in just one year. They didn't have to buy Mercedes vans to deliver packages. It was a decision they made.

 

[davideduardo]

Huge savings to you mean lower profits for them. On any given day I see the Amazon Mercedes Van driving through my neighborhood delivering packages. They seem to be here several times a day. That to me is inefficient. I have a relative who does deliveries for UPS. I described this to him, and he says it's bad planning. UPS has a computer system that makes sure his route is efficient, and he delivers to places based on geography.

Amazon purposely does multiple deliveries based on arrival points to the closest local distribution center.

Because, unlike UPS ground and the USPS, they have guaranteed deliveries, they need routes that are cycled throughout the day. Walmart's subscription service has the same multiple daily delivery cycle system, too.

Apparently they don't do that at Amazon. Perhaps another reason why they lost so much money in just one year. They didn't have to buy Mercedes vans to deliver packages. It was a decision they made.

There was a Business Week article some time back about how Amazon analyze building its own trucks like UPS does, contracting a special model like the USPS does, using commercial vehicles like FedEx does or making a world-wide deal with a manufacturer for a well-proven and economical delivery truck. Mercedes vans are very cost efficient, beautifully made, and could be customized with Amazon's electronics. The decision was very carefully thought out.

There is a reason why taxis in much of Europe are Mercedes vehicles... they are cheaper in the long run.

 

[TheBigA]

There is a reason why taxis in much of Europe are Mercedes vehicles... they are cheaper in the long run.

That may be true, but the appearance is ostentatious. Which becomes harder to justify after your company loses $1 trillion in market value.

It's the end of the boom times in tech, as layoffs keep mounting

Amazon began layoffs, reportedly affecting as many as 10,000 employees. That follows job cuts at Meta, Twitter, and Stripe, with CEOs citing economic uncertainty and a slowdown in online ad buying.

www.npr.org

That same ad buying slowdown has hit broadcast radio.

After they bought CBS Radio, Entercom spent millions on a new headquarters building in Philadelphia. Now that their stock is under water, that expense appears to be foolish.

 

[davideduardo]

That may be true, but the appearance is ostentatious. Which becomes harder to justify after your company loses $1 trillion in market value.

Anyone who is familiar with commercial vehicles knows differently. To a consumer, having your things arrive in a Mercedes may be a status symbol. However, despite getting multiple daily Amazon deliveries, I had not noticed the kind of vehicle used until you mentioned it. I doubt many consumers pay attention, as the branding does not face the home or business they are delivering to.

 

[TheBigA]

I doubt many consumers pay attention, as the branding does not face the home or business they are delivering to.

I'm shopping for a new car, and Mercedes is in the running. My friends who own them say they run very well. But like other European cars are expensive to repair. Even new tires are more expensive. Oil changes cost more. You don't get a car wash, you get it detailed.

 

[davideduardo]

I'm shopping for a new car, and Mercedes is in the running. My friends who own them say they run very well. But like other European cars are expensive to repair. Even new tires are more expensive. Oil changes cost more. You don't get a car wash, you get it detailed.

That is true for all luxury cars. I saw a table in Consumer Reports comparing Lexus, Genesis, Infinity, Acura, BMW, Mercedes, Cadillac and Lincoln among others and they are all more costly to maintain. In part, this is due to parts being made to higher technical standards, and also in part to those brands having fewer vehicles on the road so you get less economy of scale..

 

[boombox4]

I heard some faint rumblings of potential Amazon, and other, tech layoffs here in high-tech heavy Seattle. That said, Amazon uses a lot of computer bots in its operations. If they're laying off people, it would seem that there must be a definite revenue problem.

My take on it: if a high tech, future-embracing behemoth like Amazon is laying off workers, the economy is headed in the same direction.

 

[Kelly A]

Layoff's and cuts are happening everywhere. I chock a lot of it up to the pandemic throwing everything in the economy out of kilter. When consumers were stuck at home streaming and smartspeaker use went through the roof, people were signing up faster than media companies could provide new content. Then when things calmed down, production companies could go back to work, and new expensive-to-make-content started ramping back up. Companies like Amazon, and the one I work for, began moving people up into the VP and senior VP ranks in droves. Everything was; innovation!..innovation! Now they're living with a serious hangover.

As BigA mentioned, when inflation took hold, people stopped binge-watching shows and movies going outside or back to the office instead, cancelling their multiple subscriptions used when locked down. With the cancellations, advertisers curtailed spending because the captive audience wasn't so captive anymore.

 

[Harvey_Dogg]

Just about everything Alexa can do Apple and Google can do also. And there's no need to replace Alexa every couple of years like a cellphone.

My wife got ripped off by an Amazon vender who was a crook. Amazon kept their cut of our money even when they knew we had been ripped off.

Amazon's customer service sucks in my opinion. I now use eBay.

I sold my Amazon stock after the rip off. Now I'm glad I did because their stock is worth only 60% of what it was back then.

 

[landtuna]

Anyone who is familiar with commercial vehicles knows differently. To a consumer, having your things arrive in a Mercedes may be a status symbol. However, despite getting multiple daily Amazon deliveries, I had not noticed the kind of vehicle used until you mentioned it. I doubt many consumers pay attention, as the branding does not face the home or business they are delivering to.

We seem to have a variety of Amazon delivery vehicles in my 'hood. Everything from branded box trucks to nondescript white vans to 'Prime' vans to the occasional regular car.

 

[Kelly A]

We seem to have a variety of Amazon delivery vehicles in my 'hood. Everything from branded box trucks to nondescript white vans to 'Prime' vans to the occasional regular car.

Some of those are contractors to Amazon. The Amazon-branded Mercedes Sprinter vans are Amazon-owned and operated delivery trucks.

 

[Theater of My Mind]

My take on it: if a high tech, future-embracing behemoth like Amazon is laying off workers, the economy is headed in the same direction.

Corporate America has a herd mentality. Every company is doing mass layoffs right now to hedge against the predicted recession which may or may not actually happen.

The other issue is that consumers have stopped buying discretionary things because of out-of-control inflation. There's an element of irony since corporate profits hit record highs after big businesses hiked prices using "inflation", and the shock of a pandemic, as cover for their profiteering. The fact that people have now stopped buying anything = karma for those tactics.

 

[landtuna]

I was sent (at no cost IIRC) an Alexa device several years ago. It was live for 2-3 days then I found it to be intrusive, distracting, and for music, very useless. It has been unplugged ever since. For the several minutes each year I spend listening to the radio my portable HD desktop does just fine.

 

[kwthom]

Have NO concerns about Amazon staying afloat....they'll do just fine.

After all, this is a corporation that dropped some BIG coin on Rivian vehicles:

Article From Amazon

Amazon’s new electric vans will be making deliveries in over 100 U.S. cities this holiday season

Since first rolling out in July, Amazon’s zero-emissions vehicles from Rivian have delivered more than 5 million packages to customers in the U.S.

www.aboutamazon.com

As far as Alexa...no.

I sold off those chores to Google.

 

[boombox4]

Corporate America has a herd mentality. Every company is doing mass layoffs right now to hedge against the predicted recession which may or may not actually happen.

The other issue is that consumers have stopped buying discretionary things because of out-of-control inflation. There's an element of irony since corporate profits hit record highs after big businesses hiked prices using "inflation", and the shock of a pandemic, as cover for their profiteering. The fact that people have now stopped buying anything = karma for those tactics.

The recession's already been here for a while for many of us. The question is whether it worsens to the extent that the news media, and government determine it's official or not. Everyone I know is cutting back. They have to. They weren't doing that 3 years ago. Restaurants and brick and mortar stores are closing. Car dealerships are hurting. It's not boomtime out there by any stretch. It's not even normal time.

RE: corporate herd mentality: I wouldn't doubt that some of that applies to the layoffs. At the same time, I think your point about people not buying so much discretionary stuff -- less purchasing of gadgets, cutting some of the multiple streaming site subscriptions, etc., has more to do with inducing the layoffs. I've read that advertising revenues are down. That affects online companies like Meta.

Inflation is hurting the consumer. Food is still up 15-20% from last year for most items, the BLS average is 11%. Energy is up 17% on average according to the BLS. Consequently, consumers are cutting back.

I'm not sure how much these reported Amazon, FB, etc. layoffs will affect radio, if any. They don't advertise on radio.