Amazon.com, Inc. (AMZN): Firms Using Music Downloading And Streaming To Become More Profitable

Page 1 of 2

One thing the internet has managed to quite successfully accomplish over the past ten years is to monetize the online music industry. In 2012, 52% of record company revenues domestically were actually digital. When compared with other online revenue streams, such as games, newspapers, books, and film, music revenue obtained digitally utterly swamped most other. The global percentage of revenue obtained digitally the last reported year, 2011, with 32% year over year growth, compared with averages of about three percent for books, newspaper and film combined. Globally, there were over 13 million digital music subscribers at year end.

Amazon.com, Inc. (NASDAQ:AMZN)In light of these sorts of trends in the computerization of recorded music, I wanted to take a look at some of the leading domestic based music download or streaming companies. The 800 pound gorilla in the room, in terms of downloads, is Amazon.com, Inc. (NASDAQ:AMZN). Of course, the core of Amazon has been and will continue to be tangible books, records, and almost any other consumer item imaginable. But there is little reason to doubt Amazon when it decides to enter a new niche, as it has with music downloads.

The Amazon download system includes millions of titles, priced from $0.69, and entire compact discs, priced from $5.  Amazon often bundles downloads upon selling a tangible music products. Amazon is thought of in the industry as the “economy brand” of the downloadable music world, which is quite consistent with this company over the past several years in general. It has been far more interested in growing revenue than in turning profits.

Amazon’s earnings have advanced 30% annually the past five years. Its profits, which are being announced as I write this, are forecast for $0.29 per share, nearly a 30% drop from the same quarter last year. For a company selling as richly as Amazon is, I would like to see more than just revenue power. Amazon is not for me.

Hewlett-Packard Company (NYSE:HPQ) has made great strides toward downloadable music with high quality audio in its recently introduced 27 inch monitor with hip hop superstar Dr. Dre’s Beats audio imbedded into it. The monitor is to be released near February 3, and was designed specifically, with upward angled speakers, to be a high quality music player. In addition, the company has introduced a new, highly affordable line of mid-grade laptops. Later in February, the company is to release its first “Chromebooks” with 14 inch monitors and price points below $400.

All of this is not necessarily going to save this sunken ship of a company. Neither, I believe, will its new Connected Music service, which was launched in November of 2012. This music download service will be bundled into many Hewlett Packard (NYSE:HPQ) machines with no cost, short term use. But if Hewlett Packard is to thrive, it will do so by succeeding in its expansion of its enterprise business. However, even in that business there are deep pocketed, well established competitors such as International Business Machines Corp. (NYSE:IBM) and Oracle Corporation (NASDAQ:ORCL).

Hewlett-Packard’s fiscal 2012 ended October 31 on a decidedly downcast not due not only to the write off of the Autonomy investment, but sour ongoing earnings as well. It is unlikely there will be another multibillion dollar write off fiscal 2013, but ongoing earnings are not looking too bright. Wall Street is looking for first fiscal quarter of 2013 earnings of $0.71 per share, and I don’t think that is going to happen. Upfront costs of new hardware, along with general economic malaise has me thinking any real earnings recovery will not occur until the second half of the year. As for consistently earning in the $7 billion to $10 billion per year range that it was last decade, I don’t see that on the horizon at all. Hewlett Packard is not on my radar for an investment choice.

When it comes to streaming music, the best known domestic player in the industry is probably Pandora Media Inc (NYSE:P). Pandora is unique in that is uses proprietary technology based on customer feedback to customize user “radio” stations. It was recently named by JPMorgan Chase & Co. (NYSE:JPM) as that investment advisory division’s top internet small cap pick for 2013. Despite this, Pandora has declared a profit in only one quarter since going public in June, 2011, and is not forecast to be profitable in fiscal 2013, which ended January 31, 2013, or in fiscal 2014. What Pandora does have is revenue growth. Fiscal 2013 revenues should be up about 55% from the previous year, and another 40% jump is likely next year. The bulk of those revenues come from advertising, as in the last reported quarter, the third fiscal quarter ending October 20, 2012, advertising accounted for $106.3 of the overall $120 million that was reported.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!