There has been speculation for years that Amazon might break into pieces. One reason is that Amazon shareholders are worth more than the sum of its shares. Another is that the federal government could force divestment of one or more divisions because of antitrust concerns. Recently, the guessing game has been about Amazon Prime Video, one of the world’s biggest streaming businesses.
Generally, Amazon’s businesses are considered two separate businesses. Amazon is the largest and oldest e-commerce operation. In the most recently reported quarter, Amazon’s North American e-commerce operations accounted for $79 billion of the company’s total revenue of $127 billion. The unit lost $412 million. The international e-commerce operation had revenue of $28 billion, of which it lost $2.5 billion. Amazon Web Services, the world’s largest cloud computing operation, had $21 billion in revenue, of which it earned more than $5 billion.
Many experts on Amazon’s business believe that AWS should be outsourced. Cloud computing is one of the fastest growing segments of the technology industry. That growth is expected to continue as more companies move their online operations to the world’s largest cloud companies. Because Amazon Web Services revenue is so strong and the operation so profitable, AWS may be more valuable than Amazon overall.
The idea that Prime Video could be a separate company is relatively new. The business is probably worth as much as Netflix, whose value fell to $145 billion a year ago. However, before Netflix sales slowed, the market cap was close to $300 billion. Amazon’s current market value is $960 billion.
An exit from Prime Video will be complicated. Prime is part of a larger loyalty program that includes free shipping. Subscribers also get quick access to online storage, a music service and special product sales. A Prime membership costs $139 per year.
Amazon is helping Prime Video’s success because of its balance sheet and deep pockets. While other streaming services have limited cash to fund new movies and TV series, Amazon can make these investments with minimal financial impact.
Arguably, the streaming business has been less profitable recently. At least Netflix, Disney and Warner Bros. Discovery have found that out the hard way. However, in terms of subscribers, Amazon is probably the second largest company in this segment. It carries the reputation of the Amazon brand, which should not be underestimated.