Amazon reports profit plummeting, stocks hit record high

Bizarro world in Wall Street.

Wall Street really is bizarro-land. Yesterday afternoon, Amazon reported that growth in revenue and earnings per share for the fourth quarter of 2012 was below expectations ($21.27bn and $0.21 respectively), and that profit actually fell year-on-year for the same period (down to $97m). In addition, the company gave weaker-than-expected sales guidance for the first quarter of 2013, estimating $15-16.6bn versus expectations of $16.9bn.

In response to the news, shares jumped 11 per cent in after-hours trading, to an all-time high for the company. (The increase has settled down since to just 8.5 per cent.)

Matt Yglesias gives the best response:

Amazon, as best I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers… Amazon sells things to people at prices that seem impossible because it actually is impossible to make money that way.

As I wrote last week, it's this side of Amazon, far more than its UK tax avoidance, which is ultimately responsible for the demise of HMV. The company apparently has the most trusting, long-termist investors in the world, who are prepared to wait through quarter after quarter of negligible growth — and outright loss — to reach the mythical period when the company will become profitable.

Some of the news in Amazon's earnings call does imply that that period might be getting closer. The company announced that ebook sales was a "multi-billion dollar" category, and grew by 70 per cent in the last year, compared to just 5 per cent growth for physical book sales. With Amazon aggressively fighting to cut out middlemen from ebooks, and the naturally low marginal cost of selling them, the potential for a higher profit margin is there. But the company, for the moment, is responding by cutting prices (even down to zero), not increasing its margin.

And ultimately, even if investors do think that profitability for Amazon will come in their lifetime, they have to take it on trust, because the company also shows no hint of changing its pattern of being one of the most opaque in the business (even Apple releases more hard numbers than Amazon). There are no numbers at all for Kindle sales, more are there absolute figures for ebook sales.

One day, Amazon may succeed in out-competing every other retailer, and gaining monopoly profits. But there's no hint here that that day is nearing.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Getty Images
Show Hide image

Is there such a thing as responsible betting?

Punters are encouraged to bet responsibly. What a laugh that is. It’s like encouraging drunks to get drunk responsibly, to crash our cars responsibly, murder each other responsibly.

I try not to watch the commercials between matches, or the studio discussions, or anything really, before or after, except for the match itself. And yet there is one person I never manage to escape properly – Ray Winstone. His cracked face, his mesmerising voice, his endlessly repeated spiel follow me across the room as I escape for the lav, the kitchen, the drinks cupboard.

I’m not sure which betting company he is shouting about, there are just so many of them, offering incredible odds and supposedly free bets. In the past six years, since the laws changed, TV betting adverts have increased by 600 per cent, all offering amazingly simple ways to lose money with just one tap on a smartphone.

The one I hate is the ad for BetVictor. The man who has been fronting it, appearing at windows or on roofs, who I assume is Victor, is just so slimy and horrible.

Betting firms are the ultimate football parasites, second in wealth only to kit manufacturers. They have perfected the capitalist’s art of using OPM (Other People’s Money). They’re not directly involved in football – say, in training or managing – yet they make millions off the back of its popularity. Many of the firms are based offshore in Gibraltar.

Football betting is not new. In the Fifties, my job every week at five o’clock was to sit beside my father’s bed, where he lay paralysed with MS, and write down the football results as they were read out on Sports Report. I had not to breathe, make silly remarks or guess the score. By the inflection in the announcer’s voice you could tell if it was an away win.

Earlier in the week I had filled in his Treble Chance on the Littlewoods pools. The “treble” part was because you had three chances: three points if the game you picked was a score draw, two for a goalless draw and one point for a home or away win. You chose eight games and had to reach 24 points, or as near as possible, then you were in the money.

“Not a damn sausage,” my father would say every week, once I’d marked and handed him back his predictions. He never did win a sausage.

Football pools began in the 1920s, the main ones being Littlewoods and Vernons, both based in Liverpool. They gave employment to thousands of bright young women who checked the results and sang in company choirs in their spare time. Each firm spent millions on advertising. In 1935, Littlewoods flew an aeroplane over London with a banner saying: Littlewoods Above All!

Postwar, they blossomed again, taking in £50m a year. The nation stopped at five on a Saturday to hear the scores, whether they were interested in football or not, hoping to get rich. BBC Sports Report began in 1948 with John Webster reading the results. James Alexander Gordon took over in 1974 – a voice soon familiar throughout the land.

These past few decades, football pools have been left behind, old-fashioned, low-tech, replaced by online betting using smartphones. The betting industry has totally rebooted itself. You can bet while the match is still on, trying to predict who will get the next goal, the next corner, the next throw-in. I made the last one up, but in theory you can bet instantly, on anything, at any time.

The soft sell is interesting. With the old football pools, we knew it was a remote flutter, hoping to make some money. Today the ads imply that betting on football somehow enhances the experience, adds to the enjoyment, involves you in the game itself, hence they show lads all together, drinking and laughing and putting on bets.

At the same time, punters are encouraged to do it responsibly. What a laugh that is. It’s like encouraging drunks to get drunk responsibly, to crash our cars responsibly, murder each other responsibly. Responsibly and respect are now two of the most meaningless words in the football language. People have been gambling, in some form, since the beginning, watching two raindrops drip down inside the cave, lying around in Roman bathhouses playing games. All they’ve done is to change the technology. You have to respect that.

Hunter Davies is a journalist, broadcaster and profilic author perhaps best known for writing about the Beatles. He is an ardent Tottenham fan and writes a regular column on football for the New Statesman.

This article first appeared in the 05 February 2015 issue of the New Statesman, Putin's war