Amazon Could Spin Off Prime Video

By Douglas A. McIntyre Published Dec 3, 10:30AM EST

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Amazon Could Spin Off Prime Video — © marcoventuriniautieri / iStock Unreleased via Getty Images

For years there has been speculation that Amazon might be broken into pieces. One reason is that Amazon is worth more than the sum of its pieces to shareholders. The other is that the federal government might force the divestiture of one or more divisions because of antitrust concerns. Recently, the guessing game has been about Amazon Prime Video, among the world’s largest streaming businesses.
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Usually, Amazon’s businesses are seen as two separate ones. The Amazon e-commerce operation is the largest and oldest. In the most recently reported quarter, Amazon’s North American e-commerce operations had revenue of $79 billion of the company’s total of $127 billion. This unit lost $412 million. The International e-commerce operation had a revenue of $28 billion, on which it lost $2.5 billion. The Amazon Web Services business, the largest cloud computing operation in the world, had revenue of $21 billion, on which it made just over $5 billion.

Many experts about Amazon’s business believe that AWS should be spun out. Cloud computing is one of the fastest-growing parts of the tech industry. That growth is expected to continue as more and more companies move their online operations to the world’s largest cloud companies. Because the Amazon Web Service revenue is so strong and the operation is so profitable, AWS may be worth more than Amazon is as a whole.

The idea that Prime Video could be a separate company is relatively new. This business is probably worth as much as Netflix, which has had its value beaten down to $145 billion earlier in the year. However, before Netflix sales started to slow, the market cap figure was closer to $300 billion. Amazon’s current market cap is $960 billion.

A spin-out of Prime Video would be complicated. Prime is a part of a much larger loyalty program, which includes free shipping. Subscribers also get online storage, a music service, and early access to special product sales. A Prime membership costs $139 a year.

Amazon helps the success of Prime Video because of its balance sheet and deep pockets. While other streaming services have more limited available cash needed to fund new movies and TV series, Amazon can make these investments with minimal effect financially.
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It could be argued that the streaming business has become less profitable recently. At least Netflix, Disney, and Warner Bros. Discovery have found that out the hard way. However, according to subscribers count, Amazon may be the second-largest company in the sector. And it carries the Amazon brand reputation, which should not be underestimated.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.