June 10, 2015
Is Amazon spreading itself too thin?
While many laud Amazon.com for its fast fail culture, others say the organization is involved in so many different ventures that it lacks focus. The most recent venture that has video gaming circles abuzz is Amazon’s apparent move into game production.
According to a sponsored post on Gamasutra, Amazon is looking for people to work on "an ambitious new PC game project." New hires will join a talented team of individuals who have previously worked on successful games including Portal, World of Warcraft, BioShock and others.
An article on the Newsy site said one of the interesting aspects about the new project is that it apparently will be built for systems other than its own devices. The pieces points out that when Amazon Game Studios first launched it only worked on titles for Amazon platforms such as Fire TV and Fire Phone.
Paul Furio, a former employee who left the company to start his own gaming business, told Business Insider that Mike Frazzini, vice president of Amazon Game Studios, is the right person for the job with his ability to "mitigate" costs while pursuing a big vision.
Source: Amazon Game Studios
"All the pieces are in place to do what Amazon does best, only in games: build great brands that customers love, and build platforms that enable other developers to utilize amazing services," Mr. Furio said.
BrainTrust
Zel Bianco
President, founder and CEO Interactive Edge
Recent Discussions
Discussion Questions
Is Amazon on the right track with its expansion into video game production? Do you share concerns the company is moving outside its core competencies by expanding into a growing list of businesses?
Poll
Amazon’s expansion into new businesses doesn’t appear — so far — to have affected its core brand promise, which is to deliver a wide variety of products quickly at a competitive price. In fact, delivery speed is getting faster: I bought a pair of shoes on Amazon on a recent Saturday that showed up the next day (a Sunday) for about 10 percent less than I would have paid at Nordstrom. And of course, shipping was free.
Video games may be a logical extension of Amazon’s streaming businesses, or they may turn out to be a misfire like the Fire Phone. Either way, Amazon is prepared to jump on the success — or pull the plug on the failure — quickly. So I don’t see it as a mis-fit with bigger volume opportunities such as grocery delivery.
You can make a little money selling products or you can make more money, with a longer lifespan, selling content. Amazon wants to do both. I don’t see any conflict with their commerce and content businesses. They’re already in the business of making movies and television programs, both of which support their biggest money maker, Prime.
My concern is not with Amazon’s ability to expand into more markets — certainly they have proven that they have the ability to structure and hire the right people for a job and back out quickly if something is not working. However, I wonder how many Amazon-branded ventures can exist before consumers, particularly Millennials, start to feel nervous about Amazon’s power and control. There is something to be said for not only looking at what people want, but also considering who they want to buy it from. Amazon might be better served by either continuing to grow within their current industries or by slightly masking their involvement with these new ventures.
Amazon’s strategy is to touch customers in as many ways as possible while still making a profit. Not a bad approach if you think about it.
If it is successful Amazon will redefine convenience, i.e., people will begin buying more and more from Amazon because they are on the site already, interacting with its hardware products or getting well thought-out suggestions.
The critics have it wrong — expanding markets IS Amazon’s core competency.
It seems like a big part of the future of retailers like Amazon is content. That’s partly how it will differentiate on something other than price, and drive people to become Prime members. So this seems like a relevant move.
Interesting that there are concerns that the company continues to move outside its core competencies. I would ask the question: Given the lack of fundamental and consistent profitability in its core operations, just how deep are those competencies? Certainly Amazon is able to generate top-line results. Jeff Bezos is masterful at generating buzz. But profits? Not so much.
If it turns out that a lot of Amazon’s profits come from its Prime membership fees (like warehouse stores), then all this content creation makes all the sense in the world. Otherwise I remain stuck on the same question: How is Amazon going to find its way to consistent profitability?
As Amazon moves into content production for made-for-TV movies, it is a logical extension to move into producing content for video games as well. The core competencies for content creation are very similar and it is possible that TV shows can spin off into games and vice versa.
Plus increased appeal to a new demographic, continuing to contemporize the brand, etc.
Also, the cost is amortized by increased retention and acquisition of Prime members, who have much higher customer value than any other customer segments.
Amazon, Google and Apple are probably the world’s premier consumer technology companies (backward-facing to the business market) and will possibly be for decades to come. Thinking in one big silo, or a few large ones, could be a serious mistake for any one of the three. They are all big enough to manage incredibly broad portfolios.
Bear in mind that there are basically two ways to make a business grow: R&D (building better mousetraps) and M&S (marketing and sales, letting the potential customer base know about it.) There will be time enough later for these fundamentally profitable businesses to focus on M&S. Right now all three are searching for new HUGE niches that they might own, think GE, IBM and Standard Oil of the last century.
Wake up, everybody! It will be a DIFFERENT world in ten years. The time for big time R&D and strategic thinking is NOW! (Just so you don’t bankrupt what you have.) Anybody who doesn’t think this way is obviously misaligned with investing in Amazon and possibly Google. Apple has demonstrated already the ability to mint money. Will the “closed garden” win the day? Personally, I’m not counting out either Google or Amazon.
Like Paula, my one question to Amazon has been and will continue to be, “Where’s the profit?”
If Prime membership is their biggest profit maker then yes, building content to attract Prime members is key. But, and this is a big but, if Amazon isn’t profitable now, and Prime is their profit maker, are they barking up the right tree?
I guess we will see … For my two cents.
Amazon is the king of fast, convenient and customer-centric fulfillment. Backward vertical integration comes with several costs beyond capex investments. Amazon could benefit by asking itself, “What business are we in?” It’s not about the products it offers but the problems it solves for its customers.
Loss of focus and the inability to concentrate its resources where they make a difference are two strategic rules Amazon may violate at its own peril.
Looking at the history of Amazon, Amazon Web Services was one of the smartest moves in corporate history. However, I now see signs that Amazon is losing its touch with new businesses. The Fire Phone was a disaster that repeated many of the same mistakes (premium pricing, etc.) that Microsoft made early on with Windows Phone and who know whether anyone is buying the Echo. If they continue on the path they are on, Amazon will reach an inflection point where the enterprise has become so big and diversified that it starts to be unmanageable.
When Amazon began, it survived the dot com bust by entering a market until it was growing and then expanding to a new market while keeping the old markets. This has not changed. Because of their success, they continue to expand into more and different markets. Is there a limit to this strategy? Maybe. No one else has ever used or executed this strategy, so there is no way to know what the endgame might be. However, the other part of the strategy is getting out of markets that are not working quickly and moving on. The ability to know when to invest and when to leave is essential.
There is a very large talent pool in today’s market. Along with this money, real estate and resources are also at bargain prices. Amazon has enough experience to know how quickly change occurs in the Information Technology market an keeping up is important to survival. The gaming industry is a bit of a risk but worth an attempt because of its size and profit taking.
As for the make or buy decision, to make a new company this too is a good start because so many of the ones for sale have too much baggage to attempt a revitalization. This has a real chance to survive as many of the selling needs are already in place. With more and more money makers shunning Amazon, building from the ground up may be becoming a necessity that Amazon is not so afraid to pursue as its viewers are.
So Amazon tries something, and either shows small profits and gets applauded, or shows huge losses, abandons it and get even bigger applause for its “fast fail” culture. Maybe I’m old fashioned, but to me there’s something wrong with this version of a “win-win”…I guess I’m with Paula and Lee on this.
This is a very competitive and difficult business. Amazon has yet to deliver a profitable year, and needs to focus on doing what they do best, perhaps, rather than continuing to spend resources on trying to discover yet another way to spend money, without garnering the successful profits which elude them.
I seriously think they’re doing all this for PR reasons. Or, at the very least, probing something they might’ve already gotten permission to test. I don’t believe they really think that any of it will pan out. The real focus should be on grocery delivery IMO. That alone will send major shock waves through the likes of Walmart and Kroger. The rest is smoke and mirrors.
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Amazon’s expansion into new businesses doesn’t appear — so far — to have affected its core brand promise, which is to deliver a wide variety of products quickly at a competitive price. In fact, delivery speed is getting faster: I bought a pair of shoes on Amazon on a recent Saturday that showed up the next day (a Sunday) for about 10 percent less than I would have paid at Nordstrom. And of course, shipping was free.
Video games may be a logical extension of Amazon’s streaming businesses, or they may turn out to be a misfire like the Fire Phone. Either way, Amazon is prepared to jump on the success — or pull the plug on the failure — quickly. So I don’t see it as a mis-fit with bigger volume opportunities such as grocery delivery.
You can make a little money selling products or you can make more money, with a longer lifespan, selling content. Amazon wants to do both. I don’t see any conflict with their commerce and content businesses. They’re already in the business of making movies and television programs, both of which support their biggest money maker, Prime.
My concern is not with Amazon’s ability to expand into more markets — certainly they have proven that they have the ability to structure and hire the right people for a job and back out quickly if something is not working. However, I wonder how many Amazon-branded ventures can exist before consumers, particularly Millennials, start to feel nervous about Amazon’s power and control. There is something to be said for not only looking at what people want, but also considering who they want to buy it from. Amazon might be better served by either continuing to grow within their current industries or by slightly masking their involvement with these new ventures.
Amazon’s strategy is to touch customers in as many ways as possible while still making a profit. Not a bad approach if you think about it.
If it is successful Amazon will redefine convenience, i.e., people will begin buying more and more from Amazon because they are on the site already, interacting with its hardware products or getting well thought-out suggestions.
The critics have it wrong — expanding markets IS Amazon’s core competency.
It seems like a big part of the future of retailers like Amazon is content. That’s partly how it will differentiate on something other than price, and drive people to become Prime members. So this seems like a relevant move.
Interesting that there are concerns that the company continues to move outside its core competencies. I would ask the question: Given the lack of fundamental and consistent profitability in its core operations, just how deep are those competencies? Certainly Amazon is able to generate top-line results. Jeff Bezos is masterful at generating buzz. But profits? Not so much.
If it turns out that a lot of Amazon’s profits come from its Prime membership fees (like warehouse stores), then all this content creation makes all the sense in the world. Otherwise I remain stuck on the same question: How is Amazon going to find its way to consistent profitability?
As Amazon moves into content production for made-for-TV movies, it is a logical extension to move into producing content for video games as well. The core competencies for content creation are very similar and it is possible that TV shows can spin off into games and vice versa.
Plus increased appeal to a new demographic, continuing to contemporize the brand, etc.
Also, the cost is amortized by increased retention and acquisition of Prime members, who have much higher customer value than any other customer segments.
Amazon, Google and Apple are probably the world’s premier consumer technology companies (backward-facing to the business market) and will possibly be for decades to come. Thinking in one big silo, or a few large ones, could be a serious mistake for any one of the three. They are all big enough to manage incredibly broad portfolios.
Bear in mind that there are basically two ways to make a business grow: R&D (building better mousetraps) and M&S (marketing and sales, letting the potential customer base know about it.) There will be time enough later for these fundamentally profitable businesses to focus on M&S. Right now all three are searching for new HUGE niches that they might own, think GE, IBM and Standard Oil of the last century.
Wake up, everybody! It will be a DIFFERENT world in ten years. The time for big time R&D and strategic thinking is NOW! (Just so you don’t bankrupt what you have.) Anybody who doesn’t think this way is obviously misaligned with investing in Amazon and possibly Google. Apple has demonstrated already the ability to mint money. Will the “closed garden” win the day? Personally, I’m not counting out either Google or Amazon.
Like Paula, my one question to Amazon has been and will continue to be, “Where’s the profit?”
If Prime membership is their biggest profit maker then yes, building content to attract Prime members is key. But, and this is a big but, if Amazon isn’t profitable now, and Prime is their profit maker, are they barking up the right tree?
I guess we will see … For my two cents.
Amazon is the king of fast, convenient and customer-centric fulfillment. Backward vertical integration comes with several costs beyond capex investments. Amazon could benefit by asking itself, “What business are we in?” It’s not about the products it offers but the problems it solves for its customers.
Loss of focus and the inability to concentrate its resources where they make a difference are two strategic rules Amazon may violate at its own peril.
Looking at the history of Amazon, Amazon Web Services was one of the smartest moves in corporate history. However, I now see signs that Amazon is losing its touch with new businesses. The Fire Phone was a disaster that repeated many of the same mistakes (premium pricing, etc.) that Microsoft made early on with Windows Phone and who know whether anyone is buying the Echo. If they continue on the path they are on, Amazon will reach an inflection point where the enterprise has become so big and diversified that it starts to be unmanageable.
When Amazon began, it survived the dot com bust by entering a market until it was growing and then expanding to a new market while keeping the old markets. This has not changed. Because of their success, they continue to expand into more and different markets. Is there a limit to this strategy? Maybe. No one else has ever used or executed this strategy, so there is no way to know what the endgame might be. However, the other part of the strategy is getting out of markets that are not working quickly and moving on. The ability to know when to invest and when to leave is essential.
There is a very large talent pool in today’s market. Along with this money, real estate and resources are also at bargain prices. Amazon has enough experience to know how quickly change occurs in the Information Technology market an keeping up is important to survival. The gaming industry is a bit of a risk but worth an attempt because of its size and profit taking.
As for the make or buy decision, to make a new company this too is a good start because so many of the ones for sale have too much baggage to attempt a revitalization. This has a real chance to survive as many of the selling needs are already in place. With more and more money makers shunning Amazon, building from the ground up may be becoming a necessity that Amazon is not so afraid to pursue as its viewers are.
So Amazon tries something, and either shows small profits and gets applauded, or shows huge losses, abandons it and get even bigger applause for its “fast fail” culture. Maybe I’m old fashioned, but to me there’s something wrong with this version of a “win-win”…I guess I’m with Paula and Lee on this.
This is a very competitive and difficult business. Amazon has yet to deliver a profitable year, and needs to focus on doing what they do best, perhaps, rather than continuing to spend resources on trying to discover yet another way to spend money, without garnering the successful profits which elude them.
I seriously think they’re doing all this for PR reasons. Or, at the very least, probing something they might’ve already gotten permission to test. I don’t believe they really think that any of it will pan out. The real focus should be on grocery delivery IMO. That alone will send major shock waves through the likes of Walmart and Kroger. The rest is smoke and mirrors.