Less than two years ago, MOI Global featured an insight from Gary Brode, managing partner and portfolio manager at Silver Arrow Capital, on the paradigm shift of Amazon Prime.
Today, it is wonderfully clear that Gary was spot on as we’re watching increasing untapped pricing power and an expanding moat.
Here is Gary Brode’s observation from our exclusive conversation in early 2016:
Amazon Prime started as a way to pay a yearly fee and get free shipping from Amazon. It was a great deal, but what Amazon started to do was offer their Amazon Prime customers Amazon Streaming which had music and books and video as a way to tie consumers to the Amazon site. What makes Amazon Prime completely different from anything else is that in everything else the programming is the product that they use to sell you commercials.
If you’re watching CBS, they cram 16 to 18 minutes of commercials per hour down your throat and their view is that in exchange for watching the product — their show — they are going to annoy you for about a third of that time. You put up with the annoyance in exchange for getting the product. Netflix says, ‘Okay, we’re not going to annoy you. Pay us a fee and we’ll give you the program.’ Amazon Prime is different because Amazon is the product. And the program is actually the commercial.
If you think about it: They don’t charge you for the show. The show ties you to Amazon. By watching the show, that’s actually the commercial for Amazon Prime, which is the gateway into Amazon. What they’ve done is they’ve said, ‘The program is not the product and it has zero value. We’re going to give it away for free. Just don’t leave our site.’
It’s completely changed things.
Discuss further, directly with Gary.