Amazon (NSDQ: AMZN) definitely didn’t break out Kindle Fire pre-order numbers in the investor call following today’s earnings report, but CFO Tom Szkutak followed up on CEO Jeff Bezos’s earlier statement that “based on what we’re seeing with Kindle Fire pre-orders, we’re increasing capacity and building millions more than we’d already planned.” Szkutak sought to calm investor concerns that about the company’s heavy spending for the quarter, saying the company thinks about the economics of the Kindle business in terms of “lifetime value,” including the device, accessories, ad-based revenue and the “special offers” on the ad-supported Kindles.
In response to a question about whether the lifetime value of “the Kindle kind of customer [or] the core retail customer” is higher, Szkutak answered, “We’re not breaking out Kindle customer versus non-Kindle customer….but we’re seeing that once customers purchase a Kindle and are carrying around this really massive selection at their fingertips, they’re buying more content.” The company expects a “record quarter in terms of device sales,” Szkutak said, and both the e-ink readers and Fire “will be great for share owners over time.”
Some other info from the call:
Prime Instant Video, Digital Content and Lovefilm: One investor asked, “How much of the increase in operating costs in the fourth quarter do you think will be driven by digital content rights? Should we expect that to continue to drag on into 2012?” Szkutak said that Amazon will continue to purchase content for Instant Video and Prime Instant Video in the U.S. and for Lovefilm in Europe, and that those costs were included in the Q4 guidance (but not split out). Amazon bought Lovefilm entirely this January. “You should expect us to continue to invest in Lovefilm,” Szkutak said. “The business is doing very well.”
Amazon Prime customers “absolutely love” Prime Instant Video, Szkutak said. “We have a lot of customers who are requesting free trials, and then converting on the basis of those free trials,” he said. “It’s something that we’ll be adding to, certainly, over the course of the next twelve months….we’re monitoring it very carefully, and we’re watching all of the customer-facing metrics that we can, as well as looking at the economics. We feel that it’s very early, but we like what we see so far.”
He did not comment on whether Prime Instant Video might eventually be offered as a standalone service with a separate fee, and did not answer a question about why Amazon does not currently allow streaming to Prime customers through
devices like Roku or video game consoles the way Netflix (NSDQ: NFLX) and Hulu Plus do: “I don’t have anything to speak of there.” (Correction: Amazon does allow streaming to Prime customers through Roku.)
Content on the Kindle Fire: An investor asked whether the Fire’s Silk browser will “have any type of interface or search bar that links directly to either physical product or media directly from Amazon.” Szkutak called the Fire “a very integrated device….in terms of being able to offer just a vast amount of paid and free content…It will be very easy and very integrated to access all of our digital content. It will be easy to access physical product as well….It’s certainly a premium product. And at $199, it’s certainly not a premium price.” He refused to answer a question about whether Amazon was paying royalties on any Kindle Fire content.
International Strategy: Szkutak did not directly answer a question about whether Amazon’s recent expansion to Spain and Italy was “the first step further into Europe or Latin America.” “We’re very excited about [Spain and Italy] and think they are very interesting long-term opportunities,” he said.