Amazon Dealt with Regulators Last Week



From November 15 to November 22, Amazon (AMZN) stock fell -0.5%. In comparison, the stock fell -2% the previous week. Amazon stock’s trading volume was the highest on November 18, while its market cap was $865.5 billion at the end of the week. On a year-to-date basis, the stock has grown just above 13%. Until last week, the YTD returns were 15.5%. We’ll discuss some of Amazon’s business highlights during the week.

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Free Amazon music streaming services

Amazon will extend the subscription-free music streaming services to all non-Prime users. The free services will contain ad content. Notably, the services can be accessed by iOS and Playstore apps as well as Amazon Fire TV. Users can also login to the web portal to listen to music. Currently, the service is available in the US, UK, and Germany. The ad-free premium Amazon Music Unlimited subscription costs $0.99 for the first four months.

By the end of November 18, Amazon stock closed 0.8% higher than its market opening price.

Amazon could generate higher ad revenues due to free music streaming services. However, the ad content might face scrutiny from the European Digital Tax. On November 18, Reuters reported that the Czech government announced a levy of 7% digital tax on targeted ad revenues, revenues from digital market places, and lead generation from user data. Even the UK has laid down guidelines for a new digital services tax.

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AWS and Blue Origins challenge regulators over defense contracts

Amazon Web Services filed a suit with the Court of Federal Claims. AWS claimed an obvious bias in the Pentagon’s $10 billion JEDI contract. The Los Angeles Times mentioned that Microsoft (MSFT) could intervene and uphold its direct interest in the JEDI deal. The Los Angeles Times mentioned a series of reasons why AWS thinks that there was a political influence on the JEDI deal outcome.

In a related scenario, Blue Origin, another one of Jeff Bezos’s companies, protested a contract with the US Air Force. Blue Origin manufactures components for rockets and aerospace projects. CNBC reported that Blue Origin was one of the four bidders eyeing the Launch Service Procurement contract for space explorations between 2022 and 2027. In August, Blue Origin raised concerns with the GAO (Government Accountability Office) about the selection criteria for the five-year project. The GAO agreed that the petition holds merit. The Air Force would have to make some minor changes to the selection terms in the contract.

The contract is still under consideration. Blue Origin’s appeal was a proactive measure. The company that secures the contract could be the pioneer for commercial space launches in the future. The other bidders include SpaceX, United Launch Alliance, and Northrop Grumman.

Amazon’s response to the antitrust inquiry

Amazon, Apple, Google, and Facebook have been fending off probes about corporate governance policy for managing user data. On November 19, Reuters reported that the House of Representatives released the companies’ response to the inquiry. Amazon claims to host around 384,000 individual sellers and over half a million professional sellers in the US. Although the e-tailer collects aggregated data from these merchants, it denied using the data to manipulate the markets. The company claimed that it uses the data to manage price equilibrium. Amazon prices products on its online portal compared to other e-commerce websites.

Amazon only responded to some parts of the inquiry. The company hasn’t shared its revenues from the sale of private brands and the pricing strategy for these products.


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