Sarah Holder is a staff writer at CityLab covering local policy, housing, labor, and technology.
While the public buzzed around cities’ extravagant HQ2 bids, Amazon’s been taking some hits to its business and reputation, raising yet another flag for cities pouring incentives into their offers.
We’ve read all about the top contenders for Amazon HQ2 and the long-shots; the hopeful small cities and the smug, orange-hued, big ones. We know the good, the bad, and the ugly of what those cities are willing to do to secure the mega-deal—even faced with the possibility that Amazon might end up getting more than it gives, cities still can’t resist its (incredibly wealthy) charm.
Somewhat buried underneath this bidding-war news-muck, however, were two more troubling bits of Amazon news. On Tuesday, Amazon Studios CEO Roy Price resigned amid accusations of sexual harassment; and on Thursday, The Wall Street Journal reported that a major Amazon competitor, Walmart, has plans to launch an online retail store in partnership with Lord & Taylor. As the bidding deadline for Amazon HQ2 drew to a close Thursday night, another conceivable worst-case scenario emerged for cities vying for HQ2: the reminder that Amazon, however mighty, isn’t invincible.
With an Amazon bid, cities are counting on more than just the company’s immediate capital investment in infrastructure and jobs. They’re assuming a bet on Amazon’s future is low-risk, secure, and predictable; that the company will not only survive, but continue to thrive. The company is worth more than $450 billion, its stock rose more than 40% last year. And it’s not just an e-commerce site anymore: Jeff Bezos, Amazon’s CEO, has made recent large investments in media (the Washington Post), infrastructure (Texas wind farms), and groceries (Whole Foods). Still, in recent months, Amazon.com Inc.’s stocks have performed worse than Facebook, Netflix, and Apple’s—down 2.6 percent since July as the others grew. Because of Amazon’s rapid and continuing expansion into new markets, however, analysts are still betting on long-term growth, “regardless of the quarterly numbers.”
To deliver on this projected growth, Amazon relies firmly on its dominance in the online retail market. But its supremacy could soon be challenged: Walmart is said to be solidifying a deal with Lord & Taylor to develop its own version of an e-commerce store, hosted on walmart.com. The department store, which markets premium clothing towards higher income shoppers, is the latest in a string of retail partnerships Walmart has begun pursuing recently. Last year they bought the e-commerce site Jet.com, which sells “basics” at low prices; followed by the lesser known brands Moosejaw, Bonobos, and ShoeBuy. The Wall Street Journal characterizes these recent acquisitions as the seeds of “an anti-Amazon coalition.”
The race is far from one-sided. Amazon.com currently gets twice as many monthly page visitors as Walmart.com; and just as Walmart extends its reach into the cloud, Amazon is also racing to put down brick and mortar roots (see: Whole Foods). But as Art Rolnick, an economist at the University of Minnesota, reminded CityLab earlier this month: “markets change pretty fast sometimes, and companies come and go—even the great ones.”
The likelihood that walmart.com will eclipse amazon.com immediately is unlikely, but it’s a sign that Amazon’s retail supremacy might have an expiration date.
The concept of “future risk” exits the abstract when cities start giving Amazon low or no-interest loans. If a company defaults, it’s the tax-payers who are left with the bill. “When you look at the subsidy that’s coming from the sub-government (city county or state level), very seldom do they estimate the value of the risk-taking that that sub-government is taking on,” says Rolnick. “That’s one of many implicit guarantees that are hard to measure.” As David Zipper pointed out in a piece for CityLab, cities who want to protect themselves from risk could make their incentives contingent on company performance. But it’s unlikely many cities have made that kind of offer in the HQ2 arms race.
Cities are drawn to Amazon not only because of its assumed financial stability; they trust it because of its reputation. The bidding war has gotten so out of hand because Amazon is “insanely popular,” says Greg Leroy, executive director and founder of Good Jobs First. “I just think it touches so many people, and has such a positive consumer rating and image.”
Meanwhile, as Amazon’s tentacles get tangled up in the entertainment industry, that reputation is being questioned. The leadership of Amazon’s entertainment arm, Amazon Studios, has been taken to task after the New York Times and the New Yorker published accounts of decades of sexual assault and harassment allegedly committed by Hollywood film producer Harvey Weinstein, and more and more women began sharing their stories of enduring abuse. Entertainment industry players, including those employed by Amazon Studios, have been accused of complicity in Weinstein’s serial abuse and faced with independent allegations of sexual misconduct.
Rose McGowan, who reported that Harvey Weinstein raped her, called Amazon CEO Jeff Bezos out directly on Twitter for leading a corporation that she alleges ignored her allegations and consistently funds “rapists, alleged pesos, and sexual harassers.”
“I told the head of your studio that HW raped me,” she wrote. “Over & over I said it. He said it hadn’t been proven. I said I was the proof.” Jeff Bezos has not yet published a response. When asked for comment on Amazon’s relationship with Weinstein, a communications officer from Amazon Entertainment explained, “We are reviewing our options for the projects we have with The Weinstein Co.” This week, the studio announced it would pull the plug on an expensive TV drama that would have starred Robert Deniro and Julianna Moore, losing the $40 million they had already spent in pre-production. Amazon is still moving forward with a Weinstein-backed Matthew Weiner television series, however, that will cost upwards of $75 million.
Tied to all this is Amazon Studios President Roy Price, who facilitated partnerships with the Weinstein Company. Isa Hackett, a producer on the Amazon television show “The Man in the High Castle,” went public last week with the allegation that Price sexually harassed her two years ago. He was quickly placed on leave, and on Tuesday, he resigned.
These allegations and associations correspond to real, damaging—and far more important—consequences for women. But in the wake of Price’s highly publicized resignation and McGowan’s powerful thread of tweets holding Bezos accountable (liked more than 100,000 times), Amazon’s public image suffers, too.