or, Why Amazon and New York are better apart than together
|Feb 21||Public post|| 2|
Welcome to a special Orlando, Florida edition of The Amazon Chronicles. First, some housekeeping.
This was a happy moment late last night, clearing 5000 total subscribers:
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If I’m going to do an original story each week, I’m going to need sources. So one thing I’ve done this week is upgrade my tips apparatus. If you have a news tip for me, and you’re fine sending it insecurely, you can just reply to this email or message me on Twitter. But if you need a secure solution, those two don’t work very well. So I set up a separate, fairly secure email account (email@example.com) and upgraded my Signal setup. You can now text me using Signal at 267-702-6624. You can read more about Signal, including how to install it, and how to use it with good operations security here. And if you can’t find this email again when you need to send a tip, you can find both my email and my Signal number on my website.
Ain’t No Fallout Like HQ2 Fallout, Because HQ2 Fallout Don’t Stop
It’s hard to believe that “The Bridge Is Over” (my name for Amazon withdrawing from its HQ2 plans in Long Island City) was only a week ago, but it was indeed exactly a week ago. And the takes! Oh, my; the takes.
Am I nuts, or is everyone treating this (in relationship terms) like a really bad breakup when it was actually a pretty decent breakup? Both parties had serious concerns before they moved in together, and sure, it was a little abrupt in how it ended, but better now than later, right? And probably better this way than through a long, grueling fight? New York City loses some high-paying jobs and Amazon loses billions in subsidies and the prestige of New York offices. It’s like two friends who both have great qualities on their own, but one of them wants to have kids and the other one doesn’t. It would have been lovely if they were completely compatible, but they weren’t. New York has a gentrification/housing shortage problem, and Amazon has a severe distaste for unions. This was never going to be a good fit, except in Bill De Blasio’s wildest dreams.
Even De Blasio, perhaps sensing which ways the political winds had turned, wrote an anti-Amazon op-ed for The New York Times, after he’d been one of the project’s biggest and most vocal fans.
But Amazon was fighting an uphill battle in New York. J. David Goodman (whose coverage of this story for The New York Times has been excellent) tweeted that “One factor that concerned Amazon executives was how activists in New York City broadened their attacks from the specifics of the deal to the company’s practices far beyond the five boroughs, on unions and working with ICE, per two people familiar with Amazon's decision.”
And that’s been an interesting wrinkle in the fallout from all of this: the gap on the one hand between people who assign agency to Amazon in this (since after all, it made the decision to pull out) and people who assign agency to New Yorkers (since after all, they made Amazon’s position in the city increasingly untenable), and, on the other hand, the gap between people who assign agency to politicians (Alexandra Ocasio-Cortez, Michael Gianaris, Corey Johnson) and people who assign agency to activists and regular New Yorkers, who kicked up a fuss and forced their politicians to act.
Some of this is splitting hairs, maybe, but it matters, because our theories of why things happen matter. Was this a grassroots movement or a temper tantrum, a big political dick-swinging fight or constituencies mobilizing and realigning? I mean, at POLITICO, Marc J. Dunkleman blamed Robert Moses for killing the deal, and he’s been dead since 1981. People are clearly confused!
Other articles and essays worth reading: Natalie Kitroeff’s postmortem for the Times and how talks between Amazon and the city abruptly fell apart; Amazon expert Brad Stone’s “Amazon’s Escape From New York,” for Bloomberg Businessweek, which leads with, “In retrospect, the helipad was probably a bad idea”; Ben Thompson’s “Amazon Abandons New York” (“Make no mistake, Bezos deserves the benefit of the doubt as a CEO, but it sometimes seems he has a hard-time letting go of the attributes that benefitted Amazon at the beginning—frugalness, scrappiness, and a willingness to push the envelope—in favor of leveraging the structural advantages the company has developed thanks to those qualities”); Mene Ukueberuwa’s “Amazon, New York and the End of Corporate Welfare,” for The Wall Street Journal, which aptly summarizes the argument against the kinds of deals Amazon and other companies have been getting; A 1997 Jeff Bezos letter that Business Insider’s Isobel Hamilton dug up (because I always admire archival research); Katherine Krueger’s “The Most Godawful Takes I've Read About Amazon Today,” for Splinter, which gives you what it says on the tin; and Tyler Cowen’s “Amazon Winners and Losers,” which somehow managed not to make it onto the previous list! (Hint: Virginia governor Ralph “I only did blackface that one other time” Northam is not a winner. Not now, not ever again.)
I’ll also throw in Kara Swisher’s “Amazon Isn’t Interested in Making the World a Better Place” and David Leonhardt’s “New York Did Us All a Favor by Standing Up to Amazon,” both for The New York Times. (What can I say? I don’t want this newsletter to issue grades to news outlets or anything, but besides one bizarre op-ed I won’t be linking to, The New York Times’s coverage of this story, from news to (multiple) opinions has generally been first-rate.)
Let me also add these two thoughts by New Yorkers. First, Kendra Pierre-Louis:
Caille Millner@caillemillner"In New York, as elsewhere, zoning laws have been modified to provide local residents with a more powerful voice in protecting the character of their neighborhoods." https://t.co/6CPKNPlkGy
And David Yee’s “The Jobs That Starve Cities”:
We’re already living in a world in which low-paid workers are being pushed out of the city by rising salaries in the top 20% of the population (see also: the whitest). If this is the practice the city hopes to use to increase revenues and compete, then the game is rigged. I cannot get behind offering three billion dollars in tax subsidies to a company that has no demonstrable interest in treating their employees and the communities they live in with dignity, and I have no interest in living in a city whose vitality is being starved out by five companies with no local history.
I’ll make my own opinion clear: I was never in support of Amazon’s HQ2 sweepstakes, not for New York, and not for Detroit or Philadelphia, the two other cities where I have a rooting interest that bid on the site. I say this because I largely (although imperfectly) share the politics of the people I’ve quoted here. And I say this although I am a pretty devoted user of Amazon’s products, an admirer of the company’s successes, and someone who wants them to continue to succeed.
Where precisely one stands on the full range of Amazon and its practices in the 21st century is a conundrum. Where one stands on the NYC HQ2 process and ultimate outcome is not. By avoiding this, Amazon and the city of New York avoid a lifetime of headaches. They’ll miss each other, but not forever. It’s a good thing.
Besides HQ2, the Amazon story people couldn’t stop talking about this week was Amazon’s tax bill. Matthew Yglesias at Vox wrote an explainer that lays down in some detail how Amazon, giant among giants, empire upon empires, managed to have a tax bill of $0 in 2018.
TL;DR? It’s three things.
Stock-based compensation can be deducted from earnings;
Amazon gets a huge R&D credit;
There’s a new Trump tax cut that lets companies deduct 100 percent of their investment in equipment.
Tyler Cowen says much the same things, only in a more defensive and annoyed way.
But watch out, Amazon! New Zealand is coming for you. Prime Minister Jacinda Ardern announced the country would be changing its laws so it could tax the $2.7 billion dollars (New Zealand dollars, about $1.86B US) in digital goods that come through its borders, virtually or otherwise. Maybe New York is looking better already.
Amazon, Advertising Giant
After all, Amazon still has offices on (and an interest in) Manhattan. Digital advertising is an increasing share of Amazon’s business, and Amazon’s ads are an increasing share of the also-growing digital advertising pie. A new eMarketer report shows that digital ad dollars will top traditional advertising spending in 2019, Amazon is the third-largest digital advertiser, and is the fastest-growing of the Big Three. In fact, eMarketer has Amazon’s advertising division growing even faster than it originally expected, reaching $15 billion by 2020:
Amazon’s particularly looking to sell more digital video ads, although there are reports that brands have been reluctant to spend big dollars for ads that only (so far) show up in Amazon’s iPhone app. (This may be where Amazon Live, the company’s hard-to-label experiment in digital video shopping, comes in?)
This is really where Amazon has both an advantage and a disadvantage on Facebook and Google, the rest of the big three. Unlike Facebook, especially, an Amazon customer is almost always a customer who’s ready to buy. (I bought a messenger bag recently off an Instagram ad; love the bag, hate the ads I now get when I just want to be looking at my friends having more fun than I am.)
But unlike Google and Facebook, Amazon doesn’t live where you already are. Unless you count…
Alexa, Amazon’s Long Play to Finally Get Where You Are
Amazon’s experimenting through third parties with things like Alexa-enabled eyewear. First thoughts from GeekWire’s Nat Levy?
The glasses come with a controller called Loop that fits on your finger like some sort of a smart ring. It has a small joystick you can push down on and use to toggle between Focals’ various capabilities.
Despite being a foreign technology, it was pretty easy to pick up. Toggling down on the finger ring opens up a notification center. By toggling right, you can see text messages, your calendar and actions you are in the middle of, such as getting directions to a nearby landmark or restaurant.
Pushing the trigger button down opens Alexa. I wasn’t able to get Alexa to work on the demo model, but my guide, North Retail Team Lead Adam Hackney, assured me that the glasses can access many of the digital brain’s 80,000-plus skills.
Okay, an Alexa-enabled pair of glasses that doesn’t actually let you lose Alexa sounds less than compelling, and even more of a proof-of-concept prototype than Alexa already is (which is to say, pretty much).
How do you make Alexa less of a curiosity and more of a product? How do you stop trying to maximize time spent interacting with Alexa (life-saving hint: turn on Brief Mode), or the total number of skills you have available relative to Google’s similar product, and start making using Alexa actually useful and coherent across a wide range of experiences?
That whole way of Apple-like thinking is very un-Amazon, but somewhere, there has to be a team who is working on this. The Kindle eventually figured out what it was. So did Fire TV. Alexa and its countless devices will too.
(And not just because Amazon needs somewhere to run ads.)
(Although, not not because of that.)
Amazon the Content Company
The other place Amazon could run video advertising is, I don’t know, their quite popular digital video platform. But Digiday reports that like other companies in the connected TV space, Amazon’s had a hard time being able to sell programmatic video ads on its platform, or on other video platforms that use Amazon’s devices.
Digiday’s story is a little jargony and is more present-oriented than forward-thinking, so I’ll try to break it down for you. What Amazon would ideally like to do is show you an ad based on everything it knows about you; what you buy, what shows you watch, what music you like to listen to you, who your favorite sports teams are, your demographic data, really quite a comprehensive set of information. It would like to show this to you on your Fire TV, whether you’re watching Amazon Prime, listening to Audible, or heck, even watching Netflix if they could (although this would probably run Amazon afoul of Netflix).
So far, Amazon has problems doing that, because of restrictions on the content it’s showing (sometimes the content comes with ads already built-in, sometimes it has to be shown ad-free), cost problems, or both. But oh, if Amazon could figure it out. It could be as big as YouTube.
This is one of several reasons Amazon is experimenting with its own content. And it is doing so all over.
From Variety, on TV:
Aiming to ramp up its premium international content, Amazon Prime Video has greenlit the production of 17 new original series from Britain, Germany, Italy, Spain, India, Japan and Mexico.
From The Hot Sheet, on Amazon Publishing books that have become bestsellers:
Editor Danielle Marshall said Amazon takes a variety of approaches to get a reader to try a new author—including making the ebook available for free to a Prime customer or making a discount offer to a customer. She admitted that she couldn’t say much about specific marketing tactics, as Amazon keeps such methodology confidential. But Everything We Keep was in the Amazon First Reads program, and Marshall said that propelled some sales. After that, Amazon kept surfacing the book “to millions of readers” to break Lonsdale out as an author. However, Marshall was quick to add that once a book is out in the market, “Readers decide if your book is a hit. They absolutely decide.”
From TechCrunch, on audio:
Today, [Amazon-owned Audible] announced a new partnership for original comedy projects, in collaboration with Lorne Michaels’ Broadway Video. The first production from this effort is “Heads Will Roll,” a program created, produced by and starring Kate McKinnon and Emily Lynne.
The production itself is a workplace comedy about an evil queen in search of peace and quiet. It will also feature performances by Meryl Streep, Tim Gunn, Peter Dinklage, Andrea Martin, Carol Kane, Audra McDonald, Aidy Bryant, Alex Moffat, Heidi Gardner, Chris Redd, Steve Higgins, Bob the Drag Queen, Esther Perel and “Queer Eye’s” Fab Five.
And the big PR push, on movies, with Amazon Studios head Jennifer Salke. From The Hollywood Reporter:
I'm working with Nicole Kidman on this slate of sexy, date-night movies that no one's making anymore, like No Way Out or Cruel Intentions. Those kind of, "I need to stay home and just drink wine with my girlfriend, or my boyfriend, husband, and watch this." This is really Nicole's thing. When I met with her my second week in the job, we made the first-look deal out of this lunch. She was like, "Where are the hot, sexy movies?" We had a meeting of the minds on it, and I'm like, "Let's just get those movies directly, where we could release over the summer." Every Saturday night, one of those comes out, and then you create some bingeability and a marketing story behind it. But then, Will Packer just called me, and he was like, "I have a small horror movie. It could fit into your direct-to-service Blum thing." Send it over. Great, I want it to see it, because we can feed those lanes. And then the YA space is gonna be the other one. There could be 20 direct-to-service movies managed within a given year also at least.
From the same interview, on the company’s flagship Lord of the Rings series:
"There's a fantastic writers room working under lock and key. They're already generating really exciting material. They're down in Santa Monica. You have to go through such clearance, and they have all their windows taped closed. And there's a security guard that sits outside, and you have to have a fingerprint to get in there, because their whole board is up on a thing of the whole season."
And also from Salke, in The New York Times:
“It’s not about volume and endless scroll,” she said, in a clear reference to Netflix, which unfurls roughly 90 original movies annually, including documentaries. “The curated approach is the only way to go for us. Quality over quantity.”
If those two quotes sound contradictory, it’s because they kind of are? I mean, you could read it is a variation of emphasis. But I could also read it as, Amazon has a plan here, but that plan is roughly, “throw it against the wall and see what sticks.”
But by playing the role of both studio and distributor (and now monetizer on the back end!), Amazon, along with Netflix, is a major player in reshaping our expectations around entertainment, inside and outside of our TV screens. Everything is changing. Again.
(This is actually why I originally thought HQ2 would definitely end up somewhere in greater Los Angeles. I’m sure some of the 25,000-strong diaspora from the New York branch will end up there; there’s too much exciting stuff going on there, and too many areas of opportunity where Amazon needs to grow.)
Don’t Miss These
The Los Angeles Clippers selected AWS as its cloud provider. This would not be interesting news if the Clippers’ owner were nor former Microsoft CEO Steve Ballmer. That is a bad beat for Azure! Tough break, Microsoft.
Amazon announced it was going to try to make half of all of its shipments have a net zero carbon rating by 2030, which is not actually very far away! The problem here is two-day last-mile shipping, which is a key Amazon selling feature and also rotten for the environment. This is why talk about drones and electric vans and Amazon owning its own shipping company and all that stuff isn’t just talk. Amazon needs to control emissions and control costs, and it can’t do either so long as it doesn’t control the full stack.
This fascinating story about Amazon’s attempts to nail a Pentagon contract for cloud computing and the legal and practical obstacles that keep emerging when it’s trying to do so.
The New Black Hat Tactics Amazon Sellers Are Using to Take Out Their Competition. Give your competition a fake positive review, then get them suspended over it? Forget SEO wars; e-commerce wars are wild.
Amazon had an AI recruiting tool that “somehow” “taught itself” to disregard women as applicants. Thankfully, Amazon caught it and shut it down. Still, not a good look.
Another look inside how difficult it is to be an Amazon employee in peak shopping season. Mandatory 60 hours/week overtime, no holidays, workers fired if they use up their unpaid time off, no allowances for severe weather conditions, physical injuries and exhaustion requiring ambulances. These stories don’t land as hard as they used to, and that’s troubling.
This one you might discount because of the source (The American Booksellers Association, which has an obvious anti-Amazon position), but it’s a fascinating study showing the effect. Amazon growth has had on local communities.
Prime Numbers documents that in 2018 alone Amazon and its third-party vendors sold $189 billion of retail goods. The report’s analysis reveals that the nationwide results of those sales were:
540 million square feet of displaced retail space,
900,000 displaced retail jobs, and
$5.5 billion to $7.0 billion in uncollected sales tax.
For the period of 2014–2018, the cumulative loss in uncollected sales tax is estimated to be as high as $22.5 billion.
That’s a lot of money! And testament to the power of third-party sellers on Amazon, since Amazon itself now collects sales tax in all the states that have a sales tax.
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