Why Amazon Insists on Losing So Much Money on Its Phone and Streaming Video

Why Amazon Insists on Losing So Much Money on Its Phone and Streaming Video

The app that links to shopping on Amazon.com is shown on the new Amazon Fire Phone, Wednesday, June 18, 2014, in Seattle. (AP Photo/Ted S. Warren)
The app that links to shopping on Amazon.com is shown on the new Amazon Fire Phone, Wednesday, June 18, 2014, in Seattle. (AP Photo/Ted S. Warren)

 

(Wired) – Amazon has a lot of space in its warehouses, and that’s a good thing. It needs some serious room, you see, to store all those Amazon Fire Phones it didn’t sell.

Sales of the less-than-acclaimed phone were so weak that Amazon took a $170 million loss on them last quarter, according to the company’s latest earnings report. By the end of the quarter, Amazon CFO Tom Szkutak told Wall Street analysts on Thursday, Amazon still had $83 million worth of Fire Phones in inventory.

Having so many phones just waiting to find a home contributed to Amazon’s $437 million loss for the quarter—a ten-fold decline compared to the same time last year—but it wasn’t the only thing. Amazon is also pouring money into licensing and producing content for its Instant Video streaming service, an add-on for subscribers to Amazon Prime.

Now, Amazon has never shied away from spending money to make its business grow, but in the past, that has meant building more warehouses to get more stuff closer to more customers. But why is it willing to spend so much on phones and video when neither seems very related to shopping?

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