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How Much Is Amazon Investing in Content Streaming?

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Oct. 2 2018, Updated 3:20 p.m. ET

How much did Amazon’s subscription service revenue grow?

Amazon’s (AMZN) net sales increased at a three-year CAGR (compound annual growth rate) of 26% to $177.9 billion in 2017. Its net sales growth increased from 20% in 2015 to 31% in 2017. Subscription services constituted 3%–4% of its net sales in 2014 and 2015 followed by 5% of its net sales in 2016 and 2017.

The company’s subscription services revenue rose from $2.8 billion in 2014 to $9.7 billion in 2017. Its facilities include Amazon Prime, which provides access to the unlimited direct streaming of movies and TV episodes. Amazon’s net sales rose 41% in the six months that ended on June 30 and amounted to $103.9 billion. Its subscription services revenue constituted 6% of its revenue at $6.6 billion.

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How much did its costs increase?

Amazon doesn’t separately disclose the costs associated with its streaming services. Amazon Prime is estimated to have spent $4.5 billion on content in 2017. Amazon’s cost of sales increased at a three-year CAGR of 21% to $111.9 billion in 2017. Its costs climbed 14% in 2015 compared to 27% in 2017. Its cost margin contracted from 71% in 2014 to 63% in 2017.

Amazon’s cost of sales rose 34% to $61.4 billion in the six months that ended on June 30. The margin of its cost of sales contracted from 62% in the six months that ended on June 30, 2017, to 59% in the six months that ended on June 30, 2018.

Next, we’ll analyze how Amazon is competing against Netflix (NFLX) in the content-streaming market.

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