Search results matching tag 'Amazon'

Sony takes top spot in video games

Douglas McIntyre — Tue, 20 Oct 2009 10:53:00 GMT

Price cuts work. In September, Sony’s (SNE) PlayStation 3 outsold the Microsoft (MSFT) Xbox 360 and Nintendo Wii for the first time in recent memory.

Industry research firm NPD said that the video game industry, which includes both consoles and games, had sales of $1.28 billion in September, up 1% from a year ago.

Sony shipped 491,800 PS3 units in September, moving ahead of Nintendo’s Wii which shipped 462,800 units, and Microsoft’s Xbox 360 which dropped to third place with 352,600 units shipped.

Microsoft and Sony both cut the prices of most of their consoles by $100 in August. That helped sales of the PS3 move up by more than 100% from September 2008.

Sales of consoles are higher, but are profits?

The component costs for video game consoles have probably dropped over the last year, and certainly have dropped since the current generation of players was introduced.

But the price wars among the three major companies in the industry look eerily similar to the e-book price wars among Amazon (AMZN), Wal-Mart (WMT), and Best Buy (BBY). Price discounts may help drive up holiday sales, but the concept of losing money on every sale and making it up on volume by definition never works.

It will not be long before investors know how much price cuts have hurt the bottom lines at the three companies because they are all publicly traded. Shareholders won’t be happy if revenues for gaming move up sharply but margins fall apart.

Top Stocks blogger Douglas A. McIntyre is an editor at 24/7 Wall St.

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Apple loses Michael Jackson's next album?

Kim Peterson — Wed, 14 Oct 2009 14:41:00 GMT

Michael Jackson's upcoming new album, "This is It," will undoubtedly be a smash. But Apple (AAPL), the No. 1 music store in the country, may miss out on the whole thing.

Apple's iTunes store won't be offering downloads from the album, reports Digital Music News, citing confidential information it received.

The double-disc album releases on Oct. 26 worldwide, and Oct. 27 in North America. Michael Jackson's albums soared to the top of the charts after his death earlier this year, and it's safe to assume Apple would jump at the chance to offer "This is It."

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So what happened? Sony Music Entertainment and the Jackson estate only want to offer full-album downloads, reports Digital Music News. Apple insists on selling single song downloads in addition to full albums.

Now, Amazon's (AMZN) MP3 store will get the exclusive, Digital Music News reports. That's quite the score for Amazon, which is gaining ground on Apple but has been unable to shake iTunes' dominance.

Apple usually wins these conflicts, reports Peter Kafka at MediaMemo. He recalls that the group Radiohead initially balked at single-song downloads, but eventually gave in to Apple.

The Kindle and literacy

Douglas McIntyre — Thu, 08 Oct 2009 10:46:00 GMT

Jeff Bezos, the founder of Amazon (AMZN), is being praised as the man who has invented the next big and important electronic device.

That category includes the Sony (SNE) PlayStation 2, the Apple (AAPL) iPod, and the Nintendo Wii. The iPod has sold 200 million units worldwide. That, in the nomenclature of the electronics industry, makes it a once-in-a-generation success, a truly mass market product.

Bezos lowered the price on the Kindle to $249 from $299, and Amazon will release a version this month that can work over wireless networks in 100 countries. There is some compelling research that says people will not pay more than $200, or even $100, for an e-reader. That has not prevented Sony and Barnes & Noble (BKS) from entering the e-reader industry. Rumors are that Rupert Murdoch’s News Corp (NWS) will come out with a product of its own.

The Kindle’s challenge to reach 100 million sales may not have to do with price primarily. It will probably have more to do with people’s media consumption habits. More and more consumers listen and watch media now rather than reading it.

Much of the reason for the rise of the iPod and other multimedia devices is that a growing number of people, particularly younger people, would rather have passive engagement with media than active participation. Listening to music involves nearly no intellectual effort. Reading is an art, at least to the extent that it requires years of preparation and practice to read well enough to go through a metropolitan daily paper or “The Great Gatsby.”

The National Endowment for the Arts recently pointed out that “The U.S. population now breaks into two almost equally sized groups -- readers and non-readers.” The percentage of people who read literature has dropped sharply from 1982 to 2008, according to the NEA data.

A study by the Carnegie Foundation found that only 8% of people under 34 years of age would use newspapers for information in the future. That is not news to anyone in the newspaper industry who watches dropping paid circulation trends for the printed paper and anemic growth in online readership. Part, if not most of the reason for this, is that one in three people in high school drops out before graduation and in some urban areas the figure is closer to 50%.

Less than a year ago, Apple announced that its iTunes store had passed five billion song downloads since its launch in April 2003. Apple has been smart about pricing the iPod. Almost anyone can buy one, because a reasonably featured version costs as little as $79 and will hold 1,000 songs. Apple has not changed media consumption; it has just taken advantage of people’s new habits.

The rise of television did not do the book and newspaper industries any good, but probably did them little harm. Magazines like Life thrived well into the 1960s. Time and BusinessWeek prospered well into the last decade. Newspapers reached peaks of both circulation and adverting revenue in just the last ten years.

It is not shocking that the iPod was released in 2001 and that the popularity of video game consoles like Sony PlayStation 2, Nintendo Wii, and Microsoft (MSFT) Xbox rose sharply. It appears that the turn of the century was about the time that reading habits began to turn sharply, too. Fewer people are well educated and fewer of the educated seem interested in reading. Book stores and newspapers are closing. The iPod is nearly ubiquitous among the young and middle aged.

The Kindle is the product of remarkable inventiveness and it will almost certainly do well. Wall Street research firm Cowen & Co predicted that there will be 1.5 million active Kindle units in the U.S. by the end of this year. By the end of next year, that number should be closer to 3 million.

But, even with quickening demand, the Kindle’s market penetration among U.S. adults is only expected be 4% five years from now. That is shameful in a country where many children have phones that can access the Internet.

The enemy to Amazon’s ingenuity is stunning growth in indifference about reading, at least among those who can read.

Top Stocks blogger Douglas A. McIntyre is an editor at 24/7 Wall St.

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Magazine survival depends on digital

Minyanville — Wed, 07 Oct 2009 16:48:00 GMT

This article is written by Minyanville's Mike Schuster

Gourmands, harried fiancées, and dentist office waiting rooms were struck a blow on Monday when publishing giant Condé Nast announced the closure of four of its popular magazines after severe drops in ad revenue.

Elegant Bride and Modern Bride will be ceasing publication as well as the soccer mom handbook Cookie. Gourmet will be shuttered at the release of its November 2009 issue, but will live on with TV programming and online recipes.

See also, Who Needs Newspapers Anyway?

The closures see roughly 180 employees laid off and a collective circulation of more than four million issues stripped from shelves and mailboxes.

Despite the dedicated readership each magazine held, the publications were at the mercy of a three-month study by the management consulting firm McKinsey & Company. After its analysis, McKinsey advised several Condé magazines to cut 25% from their budgets, but no amount of cost-cutting initiatives was able to save the aforementioned few.

Speaking with The Washington Post, Bob Garfield -- a columnist at Advertising Age -- had a grim view of what print publishing's future had in store.

"Your content can be flawless and you can still fail," the Chaos Scenario author said. "The Internet has created a nearly infinite supply of content… which leads to declining revenue and declining ad prices. What you have is a spiraling vortex of ruin. The reason Gourmet is dead is because we are all doomed."

Albeit a tad bleak, Garfield makes strong points about publishers' unpreparedness and/or unwillingness to shift to a working digital model. How so? He made those points three and a half years ago, and little has changed.

Because print publication has worked for centuries, department heads are naturally hesitant to take on a new venture. Those who were slow to adapt were left behind, but those who jumped into unfamiliar waters without adequate planning suffered a similar fate.

Last Wednesday, journalists and publishers met at the UC Berkeley Media Technology Summit to discuss the future of digital publishing. Representatives from Google (GOOG), Microsoft (MSFT), CNN (TWX), and Salon Media (SLNM) addressed the problems that have plagued earlier ventures into online publishing.

At the summit, former editor of The Rocky Mountain News John Temple admitted, "We did not have a clear strategy, mission, or objective. The web was a complement to the paper. That's not a strategy."

Temple's mistakes don't stand alone. Efforts to charge for online content have proven to be a failing model almost everywhere given the glut of similar information available for free. Publications which feature large glossy photos won't translate as well online, but business-oriented sites stand as the rare exception.

On the other hand, as author Stephen King could attest, a complete shift toward online media while abandoning print hasn't worked well either.

And the less said about the hasty, Frankenstein monster of compilation of Time's MINE Magazine, the better.

Although it seems like they're grasping at straws without a careful eye toward the future, publishers aren't all to blame. Advertisers have yet to pin down a working revenue model for the online markets and thus have been slow to adopt the format for the last 10 to 15 years.This reluctance has forced publishers to stick with the tried-and-true print publishing -- even though the "true" has already faded.

But there's been a recent shift. While online ad revenue took a noticeable plunge this year -- down 5.3% from last year -- its percentage of the overall ad spending is on the rise. In the UK, it's even surpassed television. That's extremely promising for online models.

And if doomsday analysis and increasing online revenue wasn't enough, we may see a major shift toward online publication come early-2010, when Apple (AAPL) unveils its new tablet computer.

Even though Amazon's (AMZN) Kindle has increased the number of downloadable titles -- even periodically outselling the hard copies -- wood pulp and ink still prevails. A screen of different shades of gray doesn't prove to be a significant advantage over the printed page.However, once Apple releases a portable color display -- like a large iPhone that produces dynamic video and audio -- it could warrant a huge migration toward digital content.

And it's already begun: Last week, Gizmodo reported that Apple has been in talks since July with publishers like McGraw-Hill (MHP) and Oberlin Press to move textbooks to iTunes -- a boon for students of all ages. AppleInsider mentioned that Apple also contacted The New York Times to put their content on "a new device." And if the company can ever patch up its relationship with Google, think of what its Library Project could do on a portable tablet device. See also, The NY Times Will Be an Outsider in San Francisco.

The publishing world is on the precipice of a monumental shift, and these currently flawed models are merely prolonged stopgaps on the way to successful -- and profitable -- digital content.

As long as everyone looks before they leap.

No positions in stocks mentioned

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Disney tries to get readers online

InvestorPlace — Fri, 02 Oct 2009 15:19:00 GMT

This article was written by InvestorPlace.

Disney (DIS) wants to get children and their parents interested in reading online. Disney Digital Books is the latest in what is becoming a long line of hardware and content companies, including Amazon (AMZN), Barnes and Noble (BKS) and Sony (SNE), that hope to get readers to throw away newspapers, magazines, and hard and soft cover books.

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In the place of traditional media will be “print” products that can be read on the web or on news readers like the Amazon Kindle, Sony’s new e-reader and products from Barnes & Noble and several other content distribution firms.

Disney’s approach is slightly different from Amazon’s. Disney assumes that children will read from a PC screen. The company bills Disney Digital Books as a "cutting-edge way for children to experience the joy of reading in a robust and safe interactive environment."

Amazon, on the other hand, believes that people will download products and read them on a portable screen. Both approaches have drawbacks that technology may not be able to overcome.

For Amazon, the big drawback is price. Less than a month ago, research firm Forrester came out with an extensive study that said most people would not pay the going price of $299 to own a Kindle or similar reader. The 5,000 people polled were most likely to consider one of the devices at a price point of $50 to $100. The cost of materials just to make the Kindle is almost certainly much more than that, given the electronics complexity and capacity. The Kindle may never be a mass market product. Its price may simply be too expensive.

The Disney program has a different, but equally insurmountable, problem. There is no significant evidence that people will read content for entertainment purposes on a computer screen. A child’s book is portable. It's hard to imagine parent and child snuggling in front of the computer screen (even if it is a netbook) before bedtime.

Even the many of the educational devices from e-learning firms, like Leapfrog (LF), are portable. It is almost certain that Leapfrog has looked at the online reading market as a way to retain its very young customers as they get older. But as of yet, the company has made no attempt to enter this segment of the reading market.

Disney may be making the classic mistake of assuming that having the best content in the world means that consumers will consume it anywhere. That may be a very poor bet. The book, the simple book, has been around for centuries. That must be based on a level of utility that has never been easily replaced, and perhaps can’t be.

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New 'Trojan' raids bank accounts

Douglas McIntyre — Wed, 30 Sep 2009 10:48:00 GMT

A devilishly clever new Trojan virus that works over the Internet can hack into bank accounts while people are online and take money without being noticed.

According to CNET, the Trojan, dubbed "URLzone," has features "designed to thwart fraud detection systems which are triggered by unusual transactions.”

The new program takes online fraud to a new level. And that should cause significant alarm among consumers. It appears that the experts who create the Trojans have made them so advanced that they will soon be able to get into credit card and brokerage accounts, which could cause a nationwide disruption of the financial system and drive people away from online banking.

Financial firms have counted on increasing numbers of people to use the Internet for their transactions which save the banks money on retail locations and tellers.

One of the questions about the Trojans, of course, is where the money goes after it is stolen. If would seem that government agencies like the FBI could track the trail of money and arrest the thieves. It may not be as easy as that if the capital is being moved around the world, a system that file sharing and other malicious internet criminals have already perfected.

If the URLzone Trojan is the beginning of a wave of new attacks on the e-commerce system the use of the internet could be radically altered and that could affect firms from Amazon (AMZN) to eBay’s (EBAY) PayPal, to Wal-Mart (WMT) to Citigroup (C). Broadband, which was supposed to solve many of the countries problems by bringing information and entertainment into the home and improve business-to-business efficiency may turn out to be the pathway of a real enemy to the credit system.

Top Stocks blogger Douglas A. McIntyre is an editor at 24/7 Wall St.

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Amazon: Phones for a penny

Douglas McIntyre — Wed, 23 Sep 2009 11:06:00 GMT

Jeff Bezos, the founder and chief executive of Amazon (AMZN), is known for being eccentric, but his new handset offer may be taking that act a bit too far. Cell phones using the AT&T (T) wireless network were selling on Amazon yesterday for one penny each. If the program is a success it is likely to come back.

The only product not available at the remarkable price is the Apple (AAPL) iPhone.

The purchase of the phone must be made with a two-year AT&T wireless subscription. The phones also come with free two-day shipping.

Amazon clearly wants to take business away from brick-and-mortar consumer electronics operations such as Best Buy (BBY) and the electronics departments at bigger retailers including Wal-Mart (WMT). In the process, Amazon’s program may take traffic away from AT&T’s own retail outlets, something the cellular carrier may not like.

The Amazon move makes one thing almost certain. The prices that consumers pay for handsets from companies that don’t have a hot product like the iPhone are going to drop, whether the customers use Sprint (S), Verizon (VZ), or AT&T as their carrier.

Amazon won’t be disclosing what it loses on every phone, but its cost to underwrite the program must be considerable. It is a case of losing money on every item and hoping to make it up on volume. That never works.

Top Stocks blogger Douglas A. McIntyre is an editor at 24/7 Wall St.

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Apple and Amazon crush movie studios

Douglas McIntyre — Tue, 22 Sep 2009 11:02:00 GMT

DVD sales are flagging and rentals are up -- news likely to be unwelcome at the major movie studios. The Digital Entertainment Group announced that in the first half of this year, DVD sales fell almost 14% to $5.4 billion. DVD rental revenue rose 8% to $3.4 billion.

While kiosk operator RedBox and DVD mailer NetFlix (NFLX) are a large part of the rise in rentals, it is Apple (AAPL) and Amazon (AMZN) that really crush studio DVD sales.

Revenue for online stores was up 21% for the period to $968 million. At that rate of growth and the drop in DVD sales, Apple and Amazon have become essential to studio revenue and a real danger to premium DVD profits.

The data shows the continuing shift of power away from the huge content-creating studios owned by Viacom (VIA), Sony (SNE), News Corp (NWS), and Time Warner (TWX) and toward the increasingly powerful digital content companies which have systems for downloading films on portable devices and set-tops.

There is little the studios can do to arrest the growth of the burgeoning digital model. Most industry experts say that the content companies have much smaller margins on their Apple downloads than they do on DVD sales.

Paradigm shifts of this kind are called creative destruction by business school professors. From the standpoint of the studios, it is just destruction plain and simple.

Top Stocks blogger Douglas A. McIntyre is an editor at 24/7 Wall St.

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Why Best Buy could be a bargain

Minyanville — Tue, 15 Sep 2009 17:30:00 GMT

This article is written by Minyanville's Kristen Graham

As one of the few freestanding electronic retailers left standing, I’ve found myself warming up to Best Buy (BBY) lately. See, Best Buy is a retail winner. This morning, the company released second-quarter results have further piqued my interest in the company.

The retailer missed earnings estimates as profits fell 22%. But total revenue rose 12%, boosted by the 170 new European stores it opened over the last year. And domestic sales increased 2% -- a solid figure in my mind as positive sales growth is pretty rare in the retail space these days.

More importantly though, inventory fell 6.1%, positioning the company to enter the holiday season with a lean balance sheet. And market share soared 2% as its formerly crippled rival Circuit City is no longer in operation and current competitors just don’t offer as impressive of a selection of merchandise.

Despite increased traffic flow, the average ticket fell. This comes as no surprise as consumers simply don’t have the funds to make larger purchases right now. The key point here, though, is that consumers are still going to Best Buy for their electronic needs. Sure -- they may not be making purchases as large as they once would have, but they're still going or switching to the big-box retailer when they need electronic goods.

This is important because it indicates that the Best Buy brand is still going strong. And why wouldn’t it be? It’s nearest retail outlets pale in comparison. Radio Shack (RSH) supplies a limited selection of what sometimes seems like archaic gadgets. And consider yourself lucky if you can even navigate your way to the electronics section of a Sears (SHLD) -- its stores are disorganized and cluttered.

In reality, the only competitor of Best Buy that puts up a real fight is Amazon (AMZN). The competition between the two for this year’s holiday shopping season will undoubtedly be fierce as they duke it out for shoppers' limited holiday budgets. But there's something to be said for personal face-to-face service, and that’s precisely Best Buy’s competitive advantage.

So far, the company has done well at avoiding massive promotions; the gross margin was stable in comparison to last year. And management has successfully implemented expense control. I anticipate Best Buy gaining further market share during the holidays with Circuit City completely out of the picture. At less than 17 times earnings, I think Best Buy is a company to keep your eye on as we move closer to the most critical two months of the year for retailers.

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Wal-Mart swims up the Amazon

InvestorPlace — Thu, 03 Sep 2009 14:00:00 GMT

This post was written by Jim Woods for InvestorPlace.

There are those who accuse retail giant Wal-Mart (WMT) of being the ultimate predator. They swoop down onto small-town America gobbling up defenseless mom-and-pop retailers, or so the narrative goes. Now, Wal-Mart is testing the waters with a much more formidable opponent, and this one’s replete with piranhas and anacondas. Yes, Wal-Mart is taking on Amazon (AMZN).

On Monday, Wal-Mart announced it would launch an updated online commerce site, offering nearly 1 million items. What’s really interesting is that this store will offer products not only from Wal-Mart stores, but also from a number of outside retailers. Named the “Wal-Mart Marketplace,” the new online commerce site will offer products in a variety of categories including home, baby, toys, apparel, sporting goods and even sports memorabilia. The company’s partner retailers include eBags, CSN Stores and Pro Team.

Hmmm...sounds a lot like Amazon's business model when they branched out from books years ago. Sounds a little like eBay's (EBAY) business model, too.

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Now, those of you who read my recent post about Wal-Mart know I am a big fan of the company, not just from a business perspective, but on moral grounds. The retailer provides millions of people around the globe access to low-priced goods -- and by extension creates wealth via the low-price savings dividend we all benefit from. They also provide millions of jobs for people around the globe. But I think Wal-Mart’s real virtue lies in the fact that the company continues making solid profits.

Yes, I admit I have a bias in favor of Wal-Mart in terms of what the company represents, but I’m also a realist. And when it comes to this new online venture, I am also a skeptic. In fact, I think the company’s latest venture into Amazon.com’s wheelhouse may turn out to be a tough slog.

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Amazon is the undisputed heavyweight champion in the online retail space. In fact, it wasn't so long ago that Amazon proclaimed its desire to become the "Wal-Mart of the Web." And from my point of view as a consumer, Amazon is one of the greatest shopping experiences ever. It’s no wonder then that during the recession, the company has been gaining market share. The plethora of discounted offerings from so many retailers makes bargain shopping a breeze.

For investors, Amazon comes out on top, too. Compared to Wal-Mart, Amazon has been on a speedboat, while Wal-Mart’s been treading water. Year to date, AMZN shares are up over 50%, and if we look at the company’s five-year track record, we see gains of nearly 100%. Compare that to WMT shares, which are down 9% year to date, and off nearly 4% over the past five years.

Despite my affinity for Wal-Mart as an entity, there’s no denying that Amazon is a better investment, and Amazon will not be hurt by Wal-Mart's expanded foray into online merchandising.

As for eBay, at least one analyst thinks the new Wal-Mart venture puts the online auction site most at risk. In a research note, JP Morgan analyst Imran Khan noted that third-party sellers distributing their wares on a greater number of platforms digs right into eBay's core business. I think Khan has a good point here, and eBay will certainly be hurt. But from Wal-Mart's perspective, the retail giant is most likely set on unseating Amazon.com, not eBay.

From an investment perspective, Amazon is the best buy. Of course, if Wal-Mart’s new online venture does prove profitable, and if it does help the company’s bottom line -- as well as there share price -- then I won’t hesitate to dip my toe into their pool.

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At the time of this writing, Jim Woods did not own WMT or AMZN shares.