Amazon Cites Q2 Slowdown in Videogame Sector Growth
Amazon saw a slowdown in videogame hardware and software sales growth in Q2 that hurt its North American revenue compared with Q1’s figures, Chief Financial Officer Thomas Szkutak said on an earnings call Thursday. The weakness wasn’t enough, however, to keep the company from achieving stronger results from a year earlier in the region and overall (CED July 23 p8).
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North American revenue grew 46 percent year-to-year, to $3.59 billion. Media revenue in the region was up 15 percent to $1.32 billion, and electronics and other general merchandise revenue 76 percent to $2.09 billion. Amazon reported $3.78 billion in revenue and $1.6 billion in media revenue from the region in Q1. North American EGM revenue in Q1, however, was weaker than Q2, at $2.02 billion. Amazon includes videogame hardware and software in media, a company spokeswoman said Friday. The company classifies Kindle e-books under media but Kindle hardware under EGM, Szkutak said.
The decline in growth rates from Q1 to Q2 this year “was driven primarily by seasonality in textbook sales and slower rates of growth in videogames and videogame consoles,” Szkutak said. “The weakness” in games hardware and software resulted from reduced “allocations on the console side and also a lack of major releases” on the software side, he said.
Despite the games business’s weakness, Amazon is “still very pleased with that business,” Szkutak said. The company believes its team is “doing a great job in terms of the fundamental supporting customers” in that business, and “we like the opportunities that we see there,” he said without elaborating.
Amazon, meanwhile, is seeing “very, very strong growth” throughout the Kindle business, across hardware and applications, Szkutak said. Cloud-based computing for books has caught on with Amazon’s consumers, he said. “We're extremely pleased with what we're seeing” in device and content growth rates, he said. Even so, Szkutak said, Amazon’s physical book business grew by “double digits” year-over-year in Q2, “so we're very pleased with our overall book business, both our physical and digital business."
Amazon still offered no specifics on Kindle hardware unit sales numbers. Szkutak also declined to provide the average selling price of e-books, saying only that of the more than 630,000 titles the company offers, about 510,000 are $9.99 or less, not including the 1.8 million titles from before 1923 that Amazon offers free for the Kindle. He also declined to provide specifics on how Kindle is selling at Target, the only major U.S. retailer that carries it aside from Amazon. “We have a longstanding practice of not talking about any results from a specific partner,” he said. But Amazon is “pleased overall with our growth in Kindle all the way around, and we're pleased with our relationship there."
The company added 2,200 employees in Q2, Szkutak said. “The majority of those were operations people and within that operation, the majority of those were to support new volume” that Amazon is gaining, he said. The rest of the headcount growth is to support the company’s new-category growth in North America and other regions, the Kindle business, and support for its third-party seller and Web-services businesses, he said.