The author doesn't mean media isn't profitable, but media retail isn't profitable.

The author is somewhat right. It's only profitable when you have a walled garden that you control, so you can squeeze markup out of the supplier.

> The author doesn't mean media isn't profitable, but media retail isn't profitable.

Meanwhile HMV, the UK chain that used to be #1 in music and DVD sales before going into administration a year ago, is now rapidly expanding again (as in: adding more retail outlets) [1], and looks set to overtake Amazon in media sales if growth continues at the current pace. While they posted an overall loss, most of that is one-offs related to the restructuring, and all their stores are reportedly now profitable and they reported 17 million in operating profits.

If you'd asked me a month ago, I'd have said the same. Now I'm not so sure.

[1] http://www.cityam.com/1411962291/hmv-returns-profit-hilco-re...

The author is talking about Amazon's share in those profits. It's clear that people who own the IP make a lot of money in media content.

Which is exactly why Netflix for example is moving into content production. Does amazon do the same?

Amazon has a number of self-produced shows. Also, they have an interesting "pilot" season where they put out the first episode of a half dozen or so shows and then let people vote on which one get produced into a full season.

The quality of them is on an uptick as well. 'Transparent' has been getting a good deal of critical attention and 'Tumbleleaf' an old school by hand stop-motion animated production is just incredibly high quality.

Awesome. That's exactly what the big tech companies need to do if they want to break the media monopolies we have currently!

Amazon moved down that path two years ago, and is continuing to look at ways to expand original content:

http://www.digitaltrends.com/home-theater/amazon-joins-netfl...

And for example, Alpha House:

http://en.wikipedia.org/wiki/Alpha_House

For every Frozen, there are probably a hundred thousand failed media projects that didn't turn a profit. This is an outlier. And most of the profit ended up in the hands of the creators (Disney), not the distributors (everyone else).

Distribution of media is just not a profitable enterprise now. Too many closed, competing ecosystems and the entrenched now have so much capital acquired from other, more profitable ventures (Google from Search/Advertising, Apple from Hardware), that it makes little sense for anyone else to try unless they plan to be really different or disruptive.

I had to read this part of the article twice because I thought I couldn't be reading that right. I finally understand what he means but if taking what written at face value then he is horribly wrong.

"all profit is completely sucked out of the equation by the time you get to the consumption delivery system"

Is this false though? For all the success of the itunes store I seem to remember it not actually making a lot of profit from content?

> [A Macquarie Capital researcher] expects that this year alone, Apple's iTunes, software and services business should generate about $30 billion on a gross revenue basis, which would be more than 83 percent of S&P 500 companies. [...] Schachter believes earnings before interest and taxes through iTunes, software and services will account for 21.8 percent of the company's profits this year.

http://appleinsider.com/articles/14/03/24/itunes-and-app-sal...

Not "all" profit is sucked out of the equation by the time a DVD or video gets to retail. But a lot of it is. It's not so much a retail margin issue per se. It's that lots of stakeholders have contractual claims against the top-line sales ("front end") and bottom-line profits ("back end") of any given entertainment property. Producers, talent, studios, production companies, DVD distributors, film financing companies, investment banks, licensors and licensees, etc. Depending upon their clout and their contribution, each may get a cut of either the front-end or back-end of the property. Some of them might double-dip, taking a cut of revenues, in addition to producer's fees.

All of these shares are negotiated and locked before a single DVD (or Blu-ray, or digital download, or what have you) goes on sale. As you might imagine, it's extremely hard to price an entertainment product profitably at retail, given how little flexibility the retailer has on its pricing to begin with. Sure, a retailer could set the price high -- but every other retailer is pricing low, so that won't work. It's a tough racket. Even still, these properties sell like hotcakes, so at least some money's being made. And entertainment sales are often correlated with sales of other big categories (electronics, toys, etc.), so retailers feel the need to keep the category around as a sort of proof point.

The death of the DVD is inevitable, but it's not as imminent as people would like to think. In the meantime, the life of the DVD is kind of a pain in the ass. :)