Amazon's Hollywood villain
Not content with fighting the book world, Jeff Bezos is courting a battle with Warner Bros. Mark McSherry asks if he's gone too far
Friday 13 June 2014
Is Jeff Bezos really turning into the evil tyrant Lord Business from The Lego Movie, one of the biggest films at the US box office?
Not content with playing hardball over margins with book publishers including JK Rowling's Hachette, Mr Bezos and his all-powerful online empire Amazon appear to have opened up a new front against home video companies, including Warner Bros and its new Lego film.
In an attempt to increase its leverage in contract negotiations, Amazon has stopped taking pre-orders for Warner Bros home video releases.
Amazon customers trying to order physical copies of The Lego Movie are being instructed to "sign up to be notified when this item becomes available". Digital downloads of Warner Bros movies are still available from the world's biggest online retailer. Industry analysts said that Mr Bezos, who runs Amazon, is trying to strong-arm concessions from Warner Bros that would give his company a bigger margin on sales of its movies.
On an Amazon customer forum, disgruntled consumers voiced their displeasure. "Something weird seems to be going on with Warner Bros pre-orders," wrote one. "Loads of them are not available any more, and all of them were removed pretty much at the same time. I had several of them in my 'saved for later' list."
Another seethed: "This has got to be the most eagerly awaited 2014 movie being released so far … Amazon may be digging their own grave if they keep this up. I don't really care whose 'fault' it is … it is eerily reminiscent of the pressure Walmart puts on suppliers … not a good pattern."
Amazon has not yet responded, and Jim Noonan, a Warner Bros spokesman, said that the company's policy is "to not comment on contract points or any proprietary issues involving our partners".
In a Facebook discussion about the dispute, another entertainment company, Viz Media, advised customers that "our products are distributed by Warner Brothers, and currently they're in contract negotiations with Amazon. Pre-orders are disabled while that goes on, but we're hoping it will be resolved soon".
The trade press for the technology and entertainment industries is agog at Amazon's tactics. The digitalbits.com review site told its readers: "Some of you have been asking why your amazon.com pre-orders for select Warner Bros, Paramount catalog, Viz Media and other Warner-distributed titles have been suspended.
"We've learned through industry sources that Warner Home Video and amazon.com are in the middle of negotiations on a new contract, so pre-orders on Warner titles have been suspended until a deal is reached."
Another popular site, recode.net, ran a headline reading "Amazon Taps Lord Business to Handle Warner Bros. Contract Negotiation".
Even if Lord Business himself were running the negotiations, these remain high-stakes battles that Mr Bezos is fighting with the book publishing and movie companies.
Should Amazon's vendors and suppliers decide to play hardball themselves, the outcome is unclear, and the bad press for Mr Bezos could continue. The US TV chatshow host and Hachette author Stephen Colbert is so angry that he "gave the finger" twice to Mr Bezos recently on his show.
"This is a big blow to my bottom line," warned Mr Colbert. "This has pushed me past my tipping point... so watch out, Bezos, as this means war."
Another famous American author, James Patterson, wrote on Facebook of the book publishers' fight with Amazon: "Right now, bookstores, libraries, authors, and books themselves are caught in the cross fire of an economic war. If this is the new American way, then maybe it has to be changed – by law, if necessary – immediately, if not sooner."
In Forbes magazine's list of global billionaires, Mr Bezos was number 18 in 2013 with a net worth of $30.8bn (£18.3bn). But the finances of his company are not viewed as being quite so healthy, and Amazon is under pressure from some investors to make bigger margins.
It generated revenues of about $74.5bn last year, but its operating margins remain wafer-thin as Mr Bezos continues to invest heavily in new businesses and facilities including cloud computing and digital media. Amazon is also spending huge amounts on a number of other projects, including developing its own original shows and video games, as its core retail business comes under increasing pressure.
The Seattle-based company's recent quarterly revenue rose 23 per cent to $19.74bn, but its operating margins remained stubbornly low at around 1 per cent.
Sucharita Mulpuru, an analyst at Forrester Research, has said Amazon continues to struggle to hit the level of profitability it should be achieving, but that investors do not like the way it is spending to improve its long-term prospects. However, some of them do support Amazon's efforts to improve its bottom line, and that could mean more disputes with its suppliers and vendors over margins.
"They [Amazon] control e-commerce, they are all about the future … but they do have to do something for shareholders," said Max Wolff, an analyst at the investment manager ZT Wealth. "They own their segment … they are constantly doing 20 new things."
Amazon continues to push aggressively into new areas such as digital content and hardware. Yesterday it launched a streaming music service, and next week Mr Bezos is expected to unveil Amazon's first smartphone.
Mr Wolff said investors let Mr Bezos get way with thin margins for a long time because "to some extent [he] has inherited a little bit of the halo that was attached to Steve Jobs."
That halo may have slipped just a little in recent weeks.
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