Amazon.com (AMZN) CORRESPCorrespondence with SEC

We respectfully do not believe that net sales attributable to Prime members versus sales to non-Prime members is meaningful or useful information. As an example, slower growth or a decline in net sales, including those attributable to Prime members, may reflect increased customer purchases of products from third-party sellers, since the same product sold through our website for the same price can produce different margins (and percent of net sales results) depending on whether it is sold by Amazon or by a third-party seller. Prime membership is primarily a service designed to enhance overall customer experience and convenience, promote customer loyalty, and provide customers access to the many products and services that are available through our websites, mobile apps, Alexa, and our physical stores, which are all part of our omnichannel distribution system. As with Alexa, our Kindle e-readers, and other offerings and services, Prime is only one element that supports our focus on selling a wide range of products and services. As a

result, whether sales are associated with Prime membership does not reflect on or provide useful information about the nature of our net sales and does not reflect how management views the business.

There are a number of additional factors that limit the significance or usefulness of information on the extent to which net sales are attributable to Prime members. First, changes in the percentage of net sales attributable to Prime members could reflect many varying factors disconnected from and unrelated to the Prime program. As an example, this percentage would be impacted by net sales from AWS and other net sales that are not associated with our Prime program. In addition, utilization of Prime member benefits is not necessarily associated with activity in a customer’s account. For example, a Prime member may purchase an item that is not “Prime-eligible” (i.e., for which Prime shipping benefits are not available), or may utilize a Prime benefit that does not result in us recording revenue (such as free access to certain digital content or ad-free viewing on Twitch). In other situations, the correlation between a Prime membership and our net sales may be difficult to assess, such as when we provide Prime members early access to certain deals. Finally, the ability of a customer’s account to shift into and out of Prime status also affects both the ability to define and the relevance of Prime member net sales. For example, we provide monthly prime memberships, as well as promotional and trial memberships, and an account holder can choose whether to become a Prime member at any time, and likewise can cancel membership on several days’ notice or allow Prime membership to lapse during the year.

For the foregoing reasons, management does not track the percentage of net sales that are attributable to Prime members and, therefore, Prime membership status is not tied into our financial reporting systems. As we further develop our omnichannel distribution system, it may become more difficult to associate net sales with a Prime membership. Accordingly, we believe that the net sales information on our groups of similar products and services we now voluntarily report on a quarterly basis provides the most useful insight into the nature and sources of our net sales. In this disclosure, our subscription services category largely relates to Prime memberships.

The Letter to Shareholders furnished as an exhibit to our April 18, 2018 Current Report on Form 8-K stated that the number of active users of AWS’s machine learning services (not the total number of active users of all AWS services) increased by 250%. Machine learning services are just one of many innovative services and features offered by AWS to its customers, all of which we believe help attract new customers and increase usage by existing customers. However, we did not identify a material increase in net sales attributable to utilization of Amazon SageMaker. We hereby confirm to the Staff that we will disclose in Management’s Discussion and Analysis any material increases in net sales attributable to new products or services, consistent with the requirements of S-K Item 303(a)(3)(iii).

To distinguish a promise to provide digital content from a promise to facilitate the sale of digital content, we consider the guidance about control in ASC 606-10-55-37A and the indicators in 606-10-55-39. We consider this guidance in conjunction with the terms in our arrangements with both digital content suppliers and customers. For example, when we promise customers access to a library of digital content, such as video or music, we must have supplier arrangements in place that allow us to control distribution of the digital content in order to be able to fulfill our promise to make the digital content available to the customer. Often it is clear that we control the content because it is in our possession and we are able to set the terms of our promise to the customer. For these arrangements, we present revenue on a gross basis. Conversely, if we do not have possession of the digital content and are unable to set the terms of the promise to the customer, our role is to facilitate the sale between the supplier and customer and we present revenue on a net basis. In some situations, it is less clear as to whether we control the digital content or the terms of the customer promise. In these instances, we focus on the indicators addressed in ASC 606-10-55-39 when determining whether to record the revenue on a gross or net basis. In these situations, we find that the indicators addressing which party is responsible for fulfilling the promise and establishing customer pricing are often the strongest indicators as to which party controls the promise to the customer, and we base our gross versus net decision on this assessment.

Our reference to digital media content on page 9 relates to our adoption of the new revenue recognition standard. On that page, we believed that it was useful to qualitatively discuss some of the ASC 606 changes that impacted comparability, which included a limited number of situations involving digital media content where we reached a net decision under ASC 606 and previously had recorded revenue on a gross basis. Digital media content that we record on a net basis is included in Third-party seller services in our net sales table as a commission. These commissions have not been material and have not warranted a specific reference in our on-going disclosure.

If you have any questions or further comments, please contact me by email at shelleyr@amazon.com or by phone at (206) 266-5598.

Jeffrey P. Bezos