Total media sales rose 7.5% at Amazon in 2016 over 2015, hitting $24.21 billion. The strongest gains came in its North America group where revenue increased 9%, to $13.6 billion, while media revenue in the giant company’s international operations rose 6%. The media group is home to Amazon’s print and e-book sales.
Amazon had no specific details on how the sale of books and other content performed in the year, but the media growth rate was far below that for the entire company. Total revenue rose 27% in the year, to $136 billion, and net income increased to $2.4 billion, up from $596 million in 2015. The most important growth driver in the year was Amazon Web Services, the company's cloud computing division. Sales at AWS jumped 54% in 2016, to $12.2 billion, and operating profit more than doubled, to $3.1 billion.
Among the parts of the company highlighted by Amazon were the growth in its third-party fulfillment business, the additions it has made to Prime (Prime Reading, Twitch Prime, Audible Channels for Prime), the success of Amazon Studios, higher sales of Echo devices as well as that of Fire tablets, the launch of more renewable energy projects, and the development of host of new software tools.
With all that activity it is no surprise that media sales accounted for 17.6% of Amazon’s total revenue in 2016, compared to 20.5% in 2015.
Amazon's CFO on The Company's Take on Physical Retail
In a question and answer period with analysts following the release of its results, Amazon CFO Brian Olsavsky touched on why the online giant has opened bookstores and other physical stores. “We think the bookstores for instance are a really great way for customers to engage with our devices and see them, touch them, play with them and become fans. So we see a lot of value in that,” Olsavsky said.
He indicated that Amazon will continue to add more physical spaces, saying that “we’re still in that phase where we’re testing and learning and getting better.” Olsavsky praised the launch of the Amazon Go food store, explaining that that the store uses some technologies that are used in self-driving cars, computer vision and deep learning. The store is in beta now, Olsavsky said, adding “we like the promise of that.”
In addition to bookstores and Amazon Go, the company has opened some pop-up stores and pick-up kiosks in colleges. Olsavsky said Amazon learns from those locations as well and that the physical locations “create a great value particularly at the college pickup points.
He had no definitive word on expansion plans for the bookstores, noting that the company will open five bookstores this year (those locations have already been announced—two in the Boston area and one each in Chicago, New York City and Paramus, N.J. ) Olsavsky did say that Amazon “will be adding more bookstores,” but it wasn’t clear if he was referring to the five outlets set for 2017 or more stores beyond those five. Amazon already has opened three stores.
This story has been updated to include Olsavsky's remarks.