Tag Archives: Markets/Marketing

Disney+ Price Increase Shows Limits of Subscriber-Growth Push

The growth-at-all-costs phase of the streaming wars is over; now, profits are the priority.

Faced with slowing subscriber growth in their core domestic markets, some streaming services are shifting their focus from adding users to increasing their bottom line. The result is that streamers such as

Walt Disney Co.

DIS 4.68%

,

Netflix Inc.

NFLX -0.58%

and

Warner Bros. Discovery Inc.

WBD 4.43%

are each doing some combination of reducing costs, raising prices and creating new ad-supported tiers that offer content at lower prices to consumers but also establish a new revenue stream for the companies.

The streaming providers said the price increases are warranted because of the amount of content offered. “We have plenty of room on price value,” Disney Chief Executive Officer

Bob Chapek

said Wednesday.

The price increases come as growth has stalled domestically, usually the most-profitable market for streamers. Just 100,000 of the 14.4 million net new subscriptions to its flagship Disney+ service in the most recent quarter came from the U.S. and Canada. Of the rest, about eight million came from India, while about six million came from other countries, including 52 new markets where Disney+ has launched since May.

“Domestically, Disney+ is tapped out,” said analyst Rich Greenfield of LightShed Partners. “Disney is operating under the belief that, just as in their theme parks, they can raise prices dramatically and count on customers not dropping the service.”

Disney said that in early December it will raise the price of its ad-free, stand-alone Disney+ service in the U.S., to $10.99 a month from $7.99, and the company will begin offering an ad-supported tier for Disney+, starting at $7.99. The company also announced increases to one of its bundle packages.

In addition, the company scaled back its projections for total global subscribers to Disney+, largely in response to lower anticipated growth in India, where Disney recently was outbid for the right to stream matches from a popular cricket league.

Markets welcomed news of the price increases and the company’s better-than-expected quarterly results. Shares of Disney rose 4.7% on Thursday to close at $117.69.

Investors and analysts expect higher subscription costs and the introduction of ads to Disney+ to result in higher profits from the streaming segment, but add that price increases risk alienating some customers and increasing the platform’s churn rate, or the percentage of users who cancel the service each month. The U.S. churn rate for Disney+ is already on the rise, increasing to 4% in the second quarter from 3.1% a year earlier, according to the media analytics firm Antenna.

“We do not believe that there’s going to be any meaningful long-term impact on our churn,” Mr. Chapek said about the price increases. He said Disney+ was one of the lowest-priced streaming services when it launched, and has become more valuable over time as it has added more popular shows and movies.

Other companies that focus on streaming video are making similar moves. Warner Bros. Discovery, the newly formed media giant that owns the premium television service HBO and the streaming services HBO Max and Discovery+, reported last week that it had added 1.7 million new subscriptions. As with Disney, about all of Warner Bros. Discovery’s subscription growth came from overseas—its direct-to-consumer segment lost 300,000 domestic subscribers in the quarter.

David Zaslav,

the newly formed company’s CEO, has taken an ax to Warner Bros. Discovery’s spending, scrapping multiple high-budget movies that were in production or near completion and destined for release on HBO Max, including “Batgirl” and “Wonder Twins,” after deciding that the best return on capital for them was a tax writeoff.

“Our focus is on shaping a real business with significant global ambition but not one that solely chases the subscribers at any cost or blindly seeks to win the content spending wars,” said JB Perrette, Warner Bros. Discovery’s head of streaming, on a call with analysts last week.

Warner Bros. Discovery said it expects losses in its streaming business to peak this year, and expects profitability for the segment in 2024. Similarly, Disney, whose direct-to-consumer segment has lost more than $7 billion since Disney+ launched in late 2019, predicts that Disney+ will achieve profitability by September 2024.

Warner Bros. Discovery has signaled it will launch an ad-supported tier of HBO Max next year. The company has alluded to a new pricing strategy focused on the goal of streaming profitability, but it hasn’t revealed pricing details.

“We will shift away from heavily discounted promotions,” Mr. Perrette said.

At Netflix, customer defections jumped after it raised the price of U.S. plans by $1 to $2 a month earlier this year. In the U.S. and Canada, the company lost 1.3 million subscribers during the second quarter, more than twice the 640,000 it lost in the region in the first quarter. Like Disney+, Netflix is now looking to increase the revenue per user that they draw by selling ads.

Doing so helps streaming services make more money from their existing customer bases, while offering an alternative to price hikes, according to industry analysts.

Existing subscribers to Disney+ will be automatically put into the ad-supported tier unless they elect the higher-priced ad-free version, and some shows, such as “Dancing with the Stars,” will stream with no ads on any tier, a Disney executive said. Disney said that in general, the ad load on Disney+ will be lighter than that of other services, and will benefit from consumers who cancel cable subscriptions and replace them with streaming services.

Netflix said in July that it expected some loss of customers following a price hike and that customer departures are returning to the levels where they were before the increase.

The Los Gatos, Calif.-based company has said its coming ad-supported tier of service is likely to appeal to more-price-conscious customers who are willing to pay less in exchange for viewing ads. Netflix hasn’t said how much its ad-backed tier will cost, but it is expected to charge less than the most basic plan that is currently available, which costs $9.99 a month for a single viewer with the lowest video-resolution quality.

While there has been an overall slowdown in net subscriber growth in the U.S. and more consumers jumping between streaming services, the amount of time people spend watching streaming content continues to grow, said Marc DeBevoise, CEO of the video technology company

Brightcove.

That trend makes selling ads a more attractive strategy for streaming services, he said.

“There aren’t more people to get to subscribe, but there are more hours to capture,” he said. “It is still a growing pie of total viewership.”

Write to Robbie Whelan at robbie.whelan@wsj.com and Sarah Krouse at sarah.krouse+1@wsj.com

Corrections & Amplifications
JB Perrette is Warner Bros. Discovery’s head of streaming. An earlier version of this article incorrectly said J.B. Perette. (Corrected on Aug. 11)

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Samsung’s New $1,800 Foldable Galaxy Phone Tests High-End Budgets

NEW YORK—The entire smartphone industry is slumping except for the priciest devices.

Samsung

Electronics Co. is testing the limits of that high-end demand.

On Wednesday, Samsung unveiled its latest models of two of the world’s most-expensive phones. The Galaxy Z Fold 4, which becomes the size of a small tablet when opened, will cost about $1,800. The more compact Galaxy Z Flip 4 will go for around $1,000. The phones have prices similar to last year’s versions and become available in the U.S. later this month.

Total smartphone shipments slid 8% in the first half of this year versus the same period in 2021, largely because consumers have cut back spending on nonessential goods amid inflation and a shakier economic outlook, according to Counterpoint Research, a research firm. The declines were steepest for the lowest-priced devices, it said.

Foxconn Technology Group, the world’s biggest iPhone assembler, on Wednesday said demand for smartphones and other consumer electronics is slowing, prompting it to be cautious about the current quarter.

Shipments of “ultra-premium” phones—devices sold for $900 or more—grew by more than 20% during the same period, Counterpoint said. This category comprises mostly

Apple Inc.’s

iPhones and Samsung’s flagship devices.

WSJ’s Dalvin Brown checks out the newest foldable smartphones from Samsung to see if the kinks in early models have been ironed out and whether folding is a feature worth spending for, or just a gimmick. Illustration: Adele Morgan

The resilience of the phone industry’s upper class mirrors that of the luxury-goods business, as wealthier consumers show a willingness to keep spending on clothing, handbags and jewelry despite economic rockiness. Brands including

LVMH Moët Hennessy Louis Vuitton SE,

Ralph Lauren Corp.

and Gucci owner

Kering SA

have reported robust growth this year.

Apple, in its most recent quarter, reported a surprise rise in iPhone sales, defying analysts’ expectations for a decline. There has been no obvious macroeconomic impact on iPhone sales in recent months, Apple Chief Executive

Tim Cook

said on an earnings call last month.

Samsung, the world’s largest smartphone maker, recently said it expects the overall smartphone market to see shipments stay flat or experience minimal growth this year. But the South Korean company expressed optimism that its foldable-display devices, which are among its most expensive products, would sell well.

Demand for iPhones and Samsung’s flagship devices, boosted in recent years by the arrival of superfast 5G connectivity and pandemic-time splurging on gadgets, should remain high, said Tom Kang, a Seoul-based analyst for Counterpoint. “It’s clear that the affluent consumers are not affected by current economic headwinds,” Mr. Kang said.

Samsung has much riding on the Galaxy Z Fold 4, left, and the Galaxy Z Flip 4 becoming a success.



Photo:

SAMSUNG

The smaller of the two new devices, the Galaxy Z Flip 4, is an update of the model that accounted for most of Samsung’s foldable-phone sales last year. When fully open on its vertical axis, it has a display that measures 6.7 inches. When closed, it is half the size of most mainstream smartphones, and owners can view text messages and other alerts on a smaller, exterior screen. Compared with last year’s version, Samsung said the Galaxy Z Flip 4 takes better photos and has a slimmer hinge and larger battery.

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Would you buy one of Samsung’s new foldable phones? Why or why not? Join the conversation below.

The heftier Galaxy Z Fold 4 sports a tablet-sized display that is 7.6 inches diagonally when fully opened. It opens and closes like a book, and when shut, it has a 6.2-inch outer screen that performs most smartphone functions. The new version has a slightly thinner hinge and improved camera capabilities, Samsung said.

The Galaxy Z Fold 4 is the first device to use Android 12L, a version of the operating system created by

Alphabet Inc.’s

Google specifically for tablets and foldable phones, Samsung said.

Alongside the two foldable phones, Samsung on Wednesday also introduced two new versions of its Galaxy Watch 5, as well as a new edition of its Galaxy Buds wireless earphones, the Galaxy Buds 2 Pro.

Samsung has much riding on the Galaxy Z Fold 4 and the Galaxy Z Flip 4 becoming a success. Given their high price and fatter margins, foldable devices could represent about 60% of Samsung’s mobile-division operating profits, despite accounting for roughly one-sixth of the company’s smartphone shipments, said Sanjeev Rana, a Seoul-based analyst at brokerage CLSA.

Samsung said the Galaxy Z Fold 4 is the first device to use Android 12L, a version of the operating system created by Google specifically for tablets and foldable phones.



Photo:

SAMSUNG

Across the industry, the priciest tier of smartphones represent about 10% of annual shipments but about 70% of the industry’s profits, Counterpoint said.

Samsung was a pioneer in an industry that had gone stale when it released the first mainstream foldable smartphone more than three years ago. But the original Galaxy Fold stumbled out of the gate. Design flaws delayed its release. The pandemic closed stores, cutting off opportunities for would-be early adopters to test out the devices, Samsung executives have said. And many consumers balked at an initial price tag close to $2,000.

Last year, Samsung’s Galaxy Z Fold 3 and Galaxy Z Flip 3 saw stronger sales, helped by price cuts. The company also juiced demand through aggressive promotions and trade-in discounts that made purchases more affordable.

Worldwide foldable smartphone shipments are expected to total nearly 16 million units this year, up roughly 73% from the prior year, Counterpoint said. Samsung is projected to account for roughly 80% of the foldable market this year, according to Counterpoint.

The other foldable players—selling at prices below the ultra-premium threshold—include major Chinese brands, including Huawei Technologies Co., Xiaomi Corp., as well as BBK Electronics Co.-owned Vivo and Oppo.

Lenovo Group Ltd.

’s

Motorola,

which first launched a foldable phone in 2019, is slated to introduce a new model this month.

Write to Jiyoung Sohn at jiyoung.sohn@wsj.com

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Roku Swings to Second-Quarter Loss on Slower Ad Spending

Roku Inc.

ROKU -2.01%

said it expected two of its main revenue drivers—advertising and sales of streaming hardware—to come under further pressure during the second half of the year, sending the company’s shares down 25% in after-hours trading.

“We are in an economic environment defined by recessionary fears, inflationary pressures, rising interest rates, and ongoing supply chain disruptions,” the company said in a letter to investors Thursday in which it announced its second-quarter results. It forecast that ad spending would continue to be negatively affected as a result. “We also believe that consumer discretionary spend will continue to moderate, pressuring both Roku TV and Roku player sales.”

The company said it expected to make $700 million in revenue during the third quarter, below analysts’ expectations of $898.3 million. Roku also withdrew its full-year revenue growth rate estimate, citing uncertainty and volatility in the macro environment.

San Jose, Calif.-based Roku is the nation’s largest maker of streaming hardware—accounting for about 37% of the U.S. market, according to Parks Associates—but it derives most of its revenue from advertising: It sells all ads viewed on The Roku Channel, its own streaming service, and also sells some ads that appear on other streaming services viewed on Roku devices.

In the second quarter, the company swung to a loss of $112.3 million, or a loss of 82 cents a share, compared with a profit of $73.5 million, or 52 cents a share, a year earlier. Analysts polled by FactSet expected a loss of 71 cents a share.

Supply-chain issues are pushing up prices for Roku’s component parts, the company said. Roku said it was absorbing the higher costs to insulate customers from price increases, which resulted in a negative gross margin of 24% for its players.

Roku’s stock has had a rough 2022 so far. Even before Thursday’s after-hours plunge, its shares were down 63% since the start of the year.

As markets react to inflation and high interest rates, technology stocks are having their worst start to a year on record. WSJ’s Hardika Singh explains why the sector — from tech giants to small startups — is getting hit so hard. Illustration: Jacob Reynolds

Revenue rose 18% to $764.4 million. Of that, $673.2 million came from platform revenue—which includes revenue from advertisers and content publishers—while player revenue accounted for $91.2 million.

Roku Chief Executive

Anthony Wood

described the ad-market upheaval as cyclical. “We’re in an economic cycle where advertising is trending down. It’ll turn around,” he said during a call with analysts Thursday. He also said Roku was the beneficiary of some of that upheaval, because some advertisers were shifting more ad dollars away from traditional TV and toward streaming services, helping Roku grow its market share.

During the second quarter, advertisers in the automotive and consumer-packaged-goods industries reduced their spending on traditional TV, but increased their spending on Roku by a double-digit percentage, said Alison Levin, Roku’s vice president for ad sales and strategy, during a call with journalists before the earnings call.

Roku will soon face competition for streaming ad dollars from two major competitors: streaming services

Netflix

and

Disney

+ are planning to begin selling ads. Mr. Wood said he believed the new entrants to the market would complement Roku by making streaming ads an even greater draw for advertisers.

“With companies like Netflix and Disney moving into ads, it makes streaming ads even more mainstream,” he said.

Write to Patience Haggin at patience.haggin@wsj.com and Denny Jacob at denny.jacob@wsj.com

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Chinese Firms Are Selling Russia Goods Its Military Needs to Keep Fighting in Ukraine

BEIJING—Chinese exports to Russia of microchips and other electronic components and raw materials, some with military applications, have increased since Moscow’s invasion of Ukraine, complicating efforts by the U.S. and Western allies to isolate the country’s economy and cripple its military.

Chip shipments from China to Russia more than doubled to about $50 million in the first five months of 2022, compared with a year earlier, Chinese customs data show, while exports of other components such as printed circuits had double-digit percentage growth. Export volumes of aluminum oxide, which is used to make the metal aluminum, an important material in weapons production and aerospace, are 400 times higher than last year.

The rise in reported export values may partly be explained by inflation. But the data shows that many Chinese tech sellers have continued to do business with Russia despite U.S. scrutiny.

The Chinese exports, while just a sliver of the country’s overall exports, are a source of concern for U.S. officials. The Commerce Department added five Chinese electronics companies to a trade blacklist last month for allegedly helping Russia’s defense industry, both before the invasion and after it began.

“Our government and our national leadership has been very clear from February 24th on that China should not provide material, economic and military support for Russia in this war,”

Nicholas Burns,

the U.S. ambassador to China, said last week.

The Commerce Department said in a written response that while it didn’t believe China had sought to systematically evade U.S. export controls on Russia, it was closely monitoring trade between the countries and “will not hesitate to employ our full legal and regulatory tools against parties that provide support to the Russian military.”

The China-Russia trade in chips and other components with potential military applications involves both small, private outfits and sprawling state-owned enterprises. Incomplete data and complex networks of subsidiaries and middlemen make it hard to trace all the activity.

Chinese officials have said the country isn’t selling weapons to Russia. And overall exports from China to Russia have fallen substantially this year as many Chinese companies fear running afoul of the U.S.

With fireworks and fanfare, China and Russia opened a new bridge for freight traffic that links the two countries. As Russia’s isolation grows following its invasion of Ukraine, China is willing to keep their partnership going but not at any cost. Photo: Amur Region Government/Zuma Press

China’s support, broadly speaking, is critical to Moscow. Oil and gas revenues make up a sizable chunk of Russia’s economy. As European nations such as Germany seek to draw down Russian energy purchases, Russian President

Vladimir Putin

has stressed the importance of selling far more energy to China and others in Asia in the future.

China is also gaining leverage in its relationship with Russia. While China historically has relied on Russia, and before that the Soviet Union, for many advanced technologies, that is gradually changing as China closes the technology gap and emerges as a defense exporter in its own right.

Chinese leader

Xi Jinping

has repeatedly reaffirmed Beijing’s support for Russia, saying the two countries share a friendship with “no limits.” 

A shared dissatisfaction with the U.S.-led post-World War II international system has gradually driven the countries together during Mr. Xi’s decade in power, despite a long history of strategic mistrust.

A trade fair for semiconductor technology in Shanghai. The China-Russia trade in chips and other components with potential military applications involves both small, private outfits and sprawling state-owned enterprises.



Photo:

aly song/Reuters

Researchers at C4ADS, a Washington-based nonprofit organization that tracks security threats, have been looking at trade between Russian defense firms and China Poly Group, a conglomerate controlled by China’s central government.

Poly’s subsidiaries include a key Chinese weapons producer and exporter of small arms, missile technology and, more recently, antidrone laser technology.

Between 2014 and January 2022, C4ADS researcher Naomi Garcia identified 281 previously undisclosed shipments of so-called dual-use goods, which have both civilian and military uses, from Poly subsidiaries to Russian defense organizations, she writes in a report to be released Friday.

In one of the most recent shipments, in late January, according to the research, Poly Technologies sent antenna parts to sanctioned Russian defense company Almaz-Antey. Ms. Garcia said she hasn’t discovered Poly shipments to Russian defense firms since the Ukraine invasion began in late February.

Russian customs records reviewed by C4ADS say the antenna parts were specifically to be used in a radar that is part of Russia’s advanced S-400 surface-to-air missile system. Russian media, citing the country’s Defense Ministry, has said the S-400 system has been used in the Ukraine war.

“Poly Technologies is undeniably facilitating the Russian government’s acquisition of missile-system parts,” Ms. Garcia said.

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Poly Technologies was sanctioned by the State Department in January for engaging in proliferation of missile technologies. A State Department spokesperson said the sanctions were related to the company’s transferring of ballistic-missile technology to another country, but didn’t name which country.

Poly didn’t reply to a faxed request for comment and an official in its press office hung up when asked about its work with Russia. Almaz-Antey, Russia’s Ministry of Economic Development and Ministry of Industry and Trade didn’t respond for comment.

Beyond radar components and semiconductors, Chinese exporters also have helped fill a gap in basic materials that Russia is restricted from sourcing elsewhere.

In March, Australia prohibited the export of aluminum oxide and several other related products, citing their use in weapons development. Since then, Chinese exports of aluminum oxide to Russia have surged, hitting 153,000 metric tons in May, according to Chinese customs records, compared with 227 metric tons in the same month the year before.

Unlike state-owned conglomerate Poly, the Chinese companies that were targeted most recently by the Commerce Department are small, private hardware distributors run out of Hong Kong and China’s southern province of Guangdong. While there is relatively little information about the size of business they do with Russia, some of the companies named by the U.S. openly advertised their defense work.

One of the firms, Winninc Electronics Co., previously said on its website that it was a top distributor “for industrial, military, aerospace, and consumer electronics manufacturers worldwide.” That language has since been removed. “Hope we can get through this,” the website now says.

Another of the targeted companies, Sinno Electronics Co., also until recently said on its website that it was a “cooperative partner” of publicly traded U.S. hardware manufacturers including

Texas Instruments Inc.

and

Analog Devices Inc.

Texas Instruments didn’t respond to requests for comment. Analog Devices said it isn’t a partner of Sinno. It added that it had instructed its distributors to cease business with the company after the Commerce Department’s decision to blacklist it.

Sinno didn’t respond to a request for comment. A person who answered the phone at Winninc said the company wasn’t informed about the U.S. decision before it was made public but declined to comment further.

Maria Shagina, an expert on Russia sanctions at the International Institute for Strategic Studies in Berlin, said the latest action against the Chinese companies appeared to be intended to show that U.S. threats were credible, particularly considering how smaller companies may be better able to circumvent export controls than bigger ones.

“While the U.S. and its allies failed at deterrence with Russia, it’s important to prevent China early enough from systematically helping Russia,” she said.

Write to Brian Spegele at brian.spegele@wsj.com

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Amazon Has Been Slashing Private-Label Selection Amid Weak Sales

Amazon.com Inc.

AMZN 0.21%

has started drastically reducing the number of items it sells under its own brands, and the company has discussed the possibility of exiting the private-label business entirely to alleviate regulatory pressure, according to people familiar with the matter.

Amazon’s private-label business, with 243,000 products across 45 different house brands as of 2020, has been a source of controversy because it competes with other sellers on its platform. The decision to scale back the house brands resulted partly from disappointing sales for many of the items, the people said. It also came as the retail-and-technology giant has faced criticism in recent years from lawmakers and others that it sometimes gives advantages to its own brands at the expense of products sold by other vendors on its site.

Over the past six months, Amazon leadership instructed its private-label team to slash the list of items and not to reorder many of them, the people said. Executives discussed reducing its private-label assortment in the U.S. by well over half, one of them said.

Dave Clark initiated a review of Amazon’s private-label business.



Photo:

LINDSEY WASSON/REUTERS

The move was initiated after a review of the business by

Dave Clark,

a longtime Amazon executive who took over as head of its global consumer business in January 2021, the people said. Mr. Clark left the company last month. As a result of that review, Mr. Clark pushed the team to focus on bestselling commodity goods, along the lines of

Target Corp.’s

“Up & Up” or

Walmart Inc.’s

“Great Value” brands, rather than offer the extensive range of items Amazon currently does, the people said.

Amazon’s private-label business started in 2009 with consumer electronics products such as cables and expanded into other categories. It now encompasses everything from vitamins and coffee to clothing and furniture, with brand names such as Amazon Basics, Goodthreads and Solimo. However, Amazon has said that its house brands only account for about 1% of its retail sales. Amazon’s revenue last year, including other businesses such as its cloud-computing operation, totaled $469.8 billion.

The growing scale of its own offerings increasingly put Amazon in competition with other sellers on its platform, angering those sellers and resulting in antitrust scrutiny.

In 2020, The Wall Street Journal detailed how Amazon employees used data from its platform on individual third-party sellers to develop Amazon-branded products that compete with those sellers. The Journal also reported that year how some major brands were angered by products Amazon developed for its own labels that closely resembled their items, claiming the tech company copied their designs.

Amazon at the time said it was opening an internal investigation into how its private-label employees use seller data and if they were violating a company policy not to use such data. In testimony to Congress, then-CEO

Jeff Bezos

said “I can’t guarantee you that policy has never been violated.”

Amazon’s handling of such competition issues has been under scrutiny from a congressional committee investigating big tech companies and from regulators including the Securities and Exchange Commission, which the Journal reported in April was examining how the company disclosed some details of its business practices. The Federal Trade Commission has been investigating Amazon’s competitive practices.

Amazon Basics products on display at an Amazon 4-star store in Berkeley, Calif., in 2019.



Photo:

Cayce Clifford/Bloomberg News

Amazon has said its platform provides opportunity for nearly two million small- and medium-size businesses that sell there, and that it competes fairly and in a way that benefits its customers.

The scrutiny has prompted Amazon executives over the past year to consider fully exiting private brands, and how the company might go about that, the people said. The executives decided not to take any action until necessary, potentially as a concession they could offer if the FTC or another regulatory agency were to threaten or file litigation, some of the people said.

After a version of this article published online, Amazon said in a statement that: “We never seriously considered closing our private label business and we continue to invest in this area, just as our many retail competitors have done for decades and continue to do today.”

A spokeswoman declined to comment on whether it has discussed the possibility, or to say how many private label items it is cutting.

U.S. lawmakers have proposed legislation aimed at big tech companies including Amazon that would bar dominant tech platforms from favoring their own products and services. On Thursday, Amazon proposed concessions to settle two antitrust cases against it in the European Union. Amazon promised not to use nonpublic data about sellers on its marketplace, after the EU accused Amazon of violating competition law by using nonpublic information from merchants to compete against them.

Mr. Bezos, who stepped down as CEO last year to be executive chairman, has long been a backer of the private-label business. In the past he has bristled at its relatively small sales, said some of the people.

A few years ago, Mr. Bezos gave the private-label team a goal to reach 10% of Amazon sales by 2022, the Journal has reported. The team responded by rapidly adding thousands of items to try to juice sales, said the people involved.

Many items ended up sitting in warehouses or needing to be marked down.

Under Mr. Clark, private-label teams did a profitability review of each private-label item, determining which ones didn’t sell enough to hit their profit threshold and targeting them to be phased out. The strategy now is to make fast-selling private-brand items, such as Amazon’s phone-charging cables, that it can place at warehouses all over the country to deliver quickly, some of the people said, instead of tens of thousands of items that sell in low quantities.

Write to Dana Mattioli at dana.mattioli@wsj.com

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