Earnings Call Transcript - AMZN Q4 2021

Operator, Operator

Thank you for standing by. Good day, everyone, and welcome to the Amazon.com Q4 2021 Financial Results Teleconference. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. Today’s call is being recorded. For opening remarks, I will be turning the call over to the Director of Investor Relations, Dave Fildes. Please go ahead.

Dave Fildes, Director of Investor Relations

Hello, and welcome to our Q4 2021 financial results conference call. Joining us today to answer your questions is Brian Olsavsky, our CFO. As you listen to today’s conference call, we encourage you to have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2020. Our comments and responses to your questions reflect management’s views as of today, February 3, 2022, only and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today’s press release and our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings. During this call, we may discuss certain non-GAAP financial measures, in our press release, slides accompanying this webcast and our filings with the SEC, each of which is posted on our IR website. You will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures. Our guidance incorporates the order trends that we’ve seen to date and what we believe today to be appropriate assumptions. Our results are inherently unpredictable and may be materially affected by many factors, including uncertainty regarding the impacts of the COVID-19 pandemic, fluctuations in foreign exchange rates, changes in global economic conditions and customer demand and spending, inflation, labor market and global supply chain constraints, world events, the rate of growth of the internet, online commerce and cloud services and the various factors detailed in our filings with the SEC. This guidance also reflects our estimates to date regarding the impacts of the COVID-19 pandemic on our operations, including those discussed in our filings with the SEC. Our guidance also assumes, among other things, that we don’t conclude any additional business acquisitions, restructurings or legal settlements. It’s not possible to accurately predict demand for our goods and services, and therefore, our actual results could differ materially from our guidance. And now, I’ll turn the call over to Brian.

Brian Olsavsky, CFO

Thank you for joining us today. Let me start by once again acknowledging and thanking our employees around the world for their efforts. This was the second holiday season during this pandemic, and it required exceptional collaboration and coordination among our employees and business partners to prioritize both safety and customer experience. The team did a great job of delivering for customers this holiday. Now, let’s discuss our fourth quarter financial results. For the fourth quarter, net sales were $137.4 billion, an increase of 10% year-over-year, excluding the impact of foreign exchange. We continue to focus on offering the best experience for our customers across our businesses. On the consumer side, we welcomed millions of new Prime members in both the United States and international during the quarter, while continuing to see consistently high member renewal rates across geographies. Our third-party sellers, in particular, benefited from strong customer demand this holiday season. Third-party sellers provided 56% of all unit sales in the quarter, the highest fourth quarter mix ever. And AWS saw a continuation of the strong usage and revenue growth we’ve seen throughout 2021. AWS added more revenue year-over-year than any quarter in its history, and it’s now a $71 billion annualized run rate business, up from a $51 billion run rate one year ago. Even on a large base, revenue increased 40% year-over-year. As I’ve mentioned in prior calls, we also encourage you to look at the multiyear compounded annual revenue growth rate since the onset of the pandemic to better put this revenue growth in perspective. Despite lapping 2020’s extraordinary sales growth, we continue to see an increase in customer demand and sales during the remainder of 2021, even as the economy opened back up. For Q4, Amazon’s two-year annual compounded growth rate was 25%, excluding impacts from foreign exchange, consistent with our rate in the third quarter. We’ve invested significantly to keep pace with this demand, including nearly doubling our operations capacity in the past two years, expanding our fulfillment center footprint while adding significant transportation assets to ensure fast, on-time delivery. There are now 1.6 million Amazon employees worldwide, also doubling in the two-year period. Our fourth quarter operating income was $3.5 billion. As we mentioned in the last earnings call, we did see more than $4 billion in costs from inflationary pressures and loss productivity and disruption in our operations. The inflation primarily relates to wage increases and incentives in our operations as well as higher pricing from third-party carriers supporting our fulfillment network. Loss productivity and network disruptions were driven primarily by labor capacity constraints due to challenges in staffing up our facilities for peak. This is driven by the very tight labor market in the second half of 2021 and more recently by the emergence of the Omicron variant. We do expect these cost challenges to persist into Q1, albeit adjusted for lower seasonal volumes relative to the fourth quarter. Our results also include approximately $1 billion year-over-year negative impact from lower fixed cost leverage in our fulfillment network. Recall that we saw very high unit volumes for most of 2020 and the first half of 2021 and that fulfillment network was running at close to 100% capacity during this time. Now with more normal fulfillment capacity, our operating leverage decreases versus the comparable prior year periods. We expect to continue to see some negative year-over-year impact from this in Q1 of 2022. While we navigate these near-term headwinds, the fundamentals of our retail business are strong and we are optimistic about a number of growth businesses and a strong innovation pipeline. AWS delivered another strong quarter of growth as enterprises and developers continue to look to AWS for critical innovative cloud solutions. Now to a $71 billion annualized revenue run rate, AWS revenue grew 40% year-over-year in Q4, our fourth consecutive quarter of revenue growth rate acceleration. We hosted our 10th re:Invent conference in the quarter, welcoming 26,000 in-person attendees and hundreds of thousands who attended virtually. re:Invent remains a highlight of the year for us because it’s a great opportunity to introduce new services while engaging with customers and partners to better inform where we should be focusing next. We announced more than 115 new services and features during the event as businesses spanning all major industries continue to choose AWS as their technology provider to speed up innovation in their organizations. In the past quarter alone, NASDAQ announced a multiyear partnership to migrate North America markets to AWS, including their matching engine. Best Buy selected AWS as its preferred cloud provider for cloud infrastructure services. Meta, the parent company of Facebook, Instagram and WhatsApp, selected AWS as its long-term strategic cloud provider to accelerate artificial intelligence research and development. And Stellantis, the parent company of Chrysler, Dodge, Fiat, Jeep and Ram, selected AWS as its preferred global cloud provider for vehicle platforms to accelerate new digital products and upskill global workforce. You can find more examples in our earnings release of how the world’s largest companies such as Adidas, Goldman Sachs, Pfizer, Rivian and more are using AWS to transform their businesses. Overall, net income was $14.4 billion in the fourth quarter. While we normally focus our comments on operating income, I’d point out that this net income includes a pretax valuation gain of $11.8 billion related to our common stock investment in Rivian Automotive, which completed its initial public offering in November. Before we move to Q&A, there are three additional items I’ll mention related to our disclosures. First, we are now separating advertising services revenue from other revenue as part of our revenue disclosures by groups of similar products and services. This updated presentation is provided in the supplemental financial information included in our earnings release. We’re excited to continue innovating in areas like sponsored ads, streaming video and measurement. Of course, advertising only works so we make it useful for Amazon customers when we create great customer experiences, we deliver better outcomes for brands. Second, we’re prospectively updating the useful life of our servers and networking equipment, beginning in January. As a practice, we monitor and review the useful lives of our depreciable assets on a regular basis to make sure that our financial statements reflect our best estimate of how long the assets are going to be used in operations. We are increasing the useful life for servers from four years to five years and network equipment from five years to six years. As a result, our first quarter guidance includes an approximate $1 billion of lower depreciation expense. We expect the quarterly impact of this change to decrease throughout the year. Although we’re calling out an accounting change here, this really reflects a tremendous team effort by AWS to make our server and network equipment last longer. We’ve been operating at scale for over 15 years, and we continue to refine our software to run more efficiently on the hardware. This then lowers stress on the hardware and extends the useful life, both for the assets that we use to support AWS’ external customers as well as those used to support our own internal Amazon businesses. And finally, we will increase the price of Prime in the United States in Q1. We continue to make Prime better. In recent years, we’ve added more product selection available with fast free unlimited shipping, more exclusive deals and discounts, and more high-quality entertainment, including TV, movies, music and books. Since 2018, Prime Video has tripled the number of Amazon Originals. And this September, Prime Video will also release the highly anticipated Lord of The Rings: The Rings of Power and become the exclusive home of Thursday Night Football as part of a historic 11-year agreement with the National Football League. Since 2018 in the U.S., availability of same-day delivery has expanded from 48 metropolitan areas to more than 90. Items available for Prime free shipping have increased over 50%. And members have saved billions of dollars shopping on Prime days. It’s all on top of new program benefits like prescription savings and fast free delivery from Amazon Pharmacy and the continually growing Amazon Music catalog for Prime members as well as Prime Reading and Prime Gaming. With the continued expansion of Prime member benefits, and the increased member usage that we’ve seen as well as the rise in wages and transportation costs, Amazon will increase the price of a Prime membership in the United States with the monthly price going from $12.99 to $14.99 and the annual membership going from $119 to $139. This is our first price increase since 2018. For new Prime members, the price change will go into effect on February 18th. For current Prime members, the new price will apply after March 25th on the date of their next renewal. With that, let’s move on to Q&A.

Operator, Operator

Thank you. We will now begin the question and answer segment. Our first question comes from Eric Sheridan with Goldman Sachs. Please go ahead with your question.

Eric Sheridan, Analyst

Thanks so much for taking the question. I want to come back to the comments in the release by Andy on same-day delivery. Can you talk a little bit about how many of those investments might be behind you versus ahead of you with respect to same-day delivery and how that sets the Company up with respect to either consumption behavior by consumers versus the competitive dynamic you’re seeing against elements of like omnichannel and last-mile delivery competitors? Thanks so much.

Brian Olsavsky, CFO

Hi Eric, sure thing. So, on same-day, again, there’s multiple levels of fast shipping here from ultrafast, which is essentially our grocery business in one to two hours to same day and less, and then one-day and two-day Prime. We feel good about where we are. We’re continuing to build capacity that enables us to hit those cutoffs. I think his comments were more around getting us back to our pre-pandemic levels for one-day delivery and improving upon that and then getting same-day to more and more metropolitan areas. We’re doing that globally as well, but we really think that that combination of speed for different product levels – or product lines, excuse me, really resonates with customers. And there’s a lot of new offers for free – or excuse me, generally free shipping on a fast basis. But we know how hard this is. And our goal is to do it and do it at a price that we can make money on as well and our cost structure commensurate with that. So, that’s where the difficult work comes in, but we like the progress we’ve made developing our Amazon Logistics capability over the last few years. And what we’ve been adding, as we’ve mentioned, we’ve doubled the capacity in the network over the last two years. That is not all just to handle today’s volume. It’s also to handle getting closer to the customer and being able to ship faster. So, we like where we stand. We know there’s work to do on improving our customer service. We like the progress we’ve been making lately, but we think the future is bright on that dimension.

Operator, Operator

Our next question is from Brian Nowak with Morgan Stanley. Please proceed with your question.

Brian Nowak, Analyst

Thanks for taking my questions. I have two. Brian, the first one, there’s a lot that’s changed within the retail business, sort of pre-pandemic, post-pandemic more same-day, more grocery, more last-mile investments in an ad business. Curious to hear, as you sort of – you think about the long-term profitability of the retail segment, has your view about how you think about long-term profitability or cash flow retail fallen at all post-pandemic because of the higher required investments is the first one? Then the second one, like the new disclosure, I’d be curious for any other disclosure about the number of engineers or the size of the teams you are working on a lot of the innovation that you talked about that are sort of more around early-stage nonrevenue-generating projects, we can better understand that investment in Amazon. Thanks.

Brian Olsavsky, CFO

Sure. On the second one, we have a history of making long-term bets for customers, and some of those fall into very small short-term revenue businesses. They’ll generally roll up into other revenue, which you see as very small after we’ve separated out advertising. So, I think that you do see it in our revenue disclosure generally. But a lot of our profitability is shown at the segment level, and we’ll continue to do that with the revenue disclosure. You asked about the business model. I think it’s a good question. And we are – as we reflect over the last two years, we are encouraged by a lot of things. You ticked them off there, the adoption of digital benefits, the use of grocery and how valuable that’s become to customers, not to mention the acceleration of companies going to the cloud. The ability to double our fulfillment capacity over that time period, including making major strides in our Amazon Logistics sets us up well for the future. And – but we’ve been also dealing with a lot of disruption during this time period. So, the early wave of disruption was handling volume without the capacity to handle it, and then, quickly playing catch-up. And as that was starting to improve, labor took a turn in the United States, especially labor availability, and we’ve really had scrambled to add workers. We’ve been successful at it. We added over 273,000 employees in the last half of last year. But I think if you look at the prior year, it was over 400,000. So, there’s a lot of expansion that’s been going on in the network. And we feel good about the basic contributors of profitability. There’s – if you step back, there’s procurement margin and working with vendors and sellers as well. There’s fees in some cases, for third-party services and Prime, as we just mentioned is going up. Advertising has certainly added a layer of contribution over the last few years. But again, that only works and is only successful if we make it a good customer experience. So, we’re really working hard to do that. And that becomes a part of our ability to offer lower prices, better selection and more convenience. So, if you take those, those are all stable and strengthening areas. It’s really the onus – our onus is to get our operational efficiency back in all of our areas of cost. We have, again, built a lot of capacity. We’ve hired a lot of people. Some of those people are still – our teams are all battling Omicron right now. But, we do see the sun coming out and getting better here over the next number of quarters, and that’s going to be where we’re going to put a lot of our effort.

Operator, Operator

Our next question is from Doug Anmuth with JP Morgan.

Doug Anmuth, Analyst

Thanks for taking the question. Brian, you doubled your fulfillment network and also your headcount over the past two years. I believe you’re about 2.5 years into this investment cycle. Where is Amazon in terms of emerging from this investment cycle? Can you see a slowdown in that big investment spending this year?

Brian Olsavsky, CFO

Let's discuss capital expenditures, including our equipment finance leases, which relate to the residuals we occasionally lease for our infrastructure assets. While we're currently undertaking less of this, it's been part of our historical practices. Over the past few years, nearly 40% of our CapEx has been allocated to infrastructure, primarily supporting AWS, although Amazon itself is also a major beneficiary as we build and structure assets directly or through AWS. Around 30% has gone towards building fulfillment centers, specifically warehouses, and just under 25% is directed towards transportation capacity and expanding our AMZL network globally. The remaining 5% covers smaller investments like offices and stores. Looking ahead, we're still finalizing our plans for 2022, but we anticipate an increase in infrastructure-related CapEx. Our business continues to grow rapidly on a global scale, with regions and capacity expanding to meet usage that outpaces revenue growth. We're confident in these investments. In terms of fulfillment centers, they've accounted for about 30% of our spending over the last two years, and we expect that to stabilize in accordance with the growth of our core businesses. There may still be factors that can lead to an uptick in growth, such as the expansion of our FBA business and optimizing cube space without necessarily increasing square footage. Maintaining capacity for a robust retail and FBA business is crucial for fueling Prime’s one-day, two-day, and same-day delivery services. However, we do foresee a moderation in the fulfillment center aspect this year. Lastly, we plan to continue investing in transportation in 2022. Overall, we expect CapEx, including equipment finance leases, to rise year-over-year, although I can't specify the exact percentage at this time. I hope this gives you a clearer understanding of our approach.

Operator, Operator

Our next question is from Mark Mahaney with Evercore ISI.

Mark Mahaney, Analyst

You outlined all the costs you anticipated in the December quarter. Can you discuss any surprises you encountered? It seems you gained a bit more leverage than expected. How does this lead us to think about the financial outlook? Will we see a nice improvement in operating margins as the year progresses, with some of these temporary costs becoming more manageable and the ability to absorb more fixed costs? Please explain where the unexpected elements were concerning the $6 billion in costs you presented for the December quarter, and how we should view their impact going forward.

Brian Olsavsky, CFO

Okay, Mark. Just keep in mind that I’m sitting in Seattle, so my perspective on the situation is a bit different from yours. However, we do see things improving. Let's take a moment to revisit Q4. We had estimated around $4 billion in extra costs due to labor shortages, inefficiencies, increased labor rates, shift premium differentials, and higher transportation expenses. In the end, we exceeded that $4 billion target slightly, but overall, things went as we anticipated. While hiring was strong, we could have done better; we needed more personnel, which led to additional overtime costs and higher third-party transportation expenses. The main challenge in Q4 was to increase staffing, and we aimed to add 150,000 people or more. We ended up adding about 140,000 new hires in the quarter and 273,000 in the latter half of the year. As we move into 2022, we feel more optimistic about labor, although the Omicron variant has introduced a new labor issue with many employees on leave due to COVID-19 until they receive a negative test and return to work. This situation can lead to circumstances where we are paying for the same labor hour multiple times if an employee is on leave while another is covering their shift as overtime. Therefore, we are facing cost pressure in Q1. The positive note is that the labor challenges in Q1 are not as severe as they were in Q3 and Q4. So, we are hopeful. Our focus now needs to be on improving our operational efficiency as staffing levels rise. We intend to concentrate efforts on increasing our transportation speeds to exceed pre-pandemic levels. There are various challenges at play right now. Our team has been dedicated and working hard for over two years, and we have confidence that things will improve as we progress through the year. I hope that answers your question.

Operator, Operator

Our next question is from Colin Sebastian with Baird.

Colin Sebastian, Analyst

I wanted to ask about AWS, and nice acceleration in revenues there. Wondering if you could talk about maybe more specifically the driver of that acceleration. Is the application layer maybe now large enough where you’re seeing that contribute incrementally to growth? And I think in the release, you also highlighted infrastructure expansion globally. I think it might be interesting to add some context around the scale or distribution of the AWS business internationally outside of North America, if you could put some context around that. Thank you.

Brian Olsavsky, CFO

Sure, Colin. Thanks for your questions. On the growth rate, I think it’s a combination of things. We’ve been adding resources in sales and marketing over the last few years, and that is starting to pay off. There was some cutback in spending in the early parts of 2020 that we’re lapping as people – different companies have different COVID experiences, some their volumes went through the roof, some their volumes went through the floor. So as things have stabilized, I think the lasting thing is that a lot of people made the commitment to go to the cloud, better understood the benefits of that and probably accelerated their internal timelines for that. And we’re there to help, and we’re working very hard to make that journey a successful one and we have a strong team of sales and marketing professionals to help as well as technical advisors. So that is what we’re seeing, and we’re pleased with the acceleration in the business the last four quarters. We will see – we’re also pleased with the efficiency of the infrastructure investment, as I mentioned, the expansion of useful life is not done on an accounting basis unless you have proof that it’s actually – we’re seeing it in real life. So, very positive indicators in AWS.

Dave Fildes, Director of Investor Relations

Colin, it’s Dave here. Just following up on the international point, what we’re seeing outside of the U.S., I mean we are – as part of that overall strong growth, we are continuing to see considerable momentum really around the world. It’s customers moving their workloads over to AWS at different phases. And so, as you look at the release, some of the other announcements, there’s a good diverse list of companies, Adidas in Germany migrated its SAP environments to AWS, in the Netherlands, Stellantis selected AWS as its preferred cloud provider. There’s a number of really great companies examples doing different big things at different stages of that migration. What’s been important to us, among many things, is continuing to expand our global infrastructure footprint really to support this momentum we’re seeing. So, just this last quarter in the fourth quarter, we opened the Asia Pacific region over in Jakarta. And we’ve got announcements for plans to launch in Canada in the Calgary region next year or perhaps in 2023 or 2024. So, a lot of work and a lot of momentum. Those are just a few examples. But where we sit now, it’s – AWS has 84 availability zones in 26 regions around the world right now. And just in terms of the forward-looking roadmap, we have announced to launch 24 more zones in 8 more regions, and those will be here in the next couple of years.

Operator, Operator

Our next question is from Jason Helfstein with Oppenheimer.

Jason Helfstein, Analyst

Thanks. So, I just want to dig a little bit into third-party seller services. The growth slowed there even on a two-year stack. So maybe if you could talk about some of the factors that you think could be weighing on that? And then, just on AWS, you kind of laid out some color there. Is there any bottlenecks to growth that you’re still seeing? I mean, you talked about why this is a very good quarter and having to do with some of the comps, but any bottlenecks to grow, either supply chain or employee-related? Thank you.

Brian Olsavsky, CFO

Sorry. Jason, is your second question on AWS?

Jason Helfstein, Analyst

Yes, on AWS.

Brian Olsavsky, CFO

Yes, let me begin with that. We do not experience bottlenecks on the capacity side; rather, the limitation in that area is our capability to collaborate with customers to speed up their timelines. We are making investments and putting in effort to address that. Operationally, we are continually increasing our capacity, as I noted in the capital discussion, and we anticipate this growth to continue year-over-year in 2022. Regarding third-party services, we are observing a declining growth rate similar to the broader business trends. This stems from the extremely high growth period we experienced from Q3 2020 to Q1 2021. However, when looking at a two-year timeframe, there is still a 31% compounded annual growth in third-party seller services revenue. While it was 34% last quarter, it has remained steady. Importantly, sellers have significantly benefited in Q4, with a record percentage of units reaching 56% for third-party sales. We continue to invest substantially to support sellers' success on our platform. They are also major consumers of advertising as they use it to build their brands and help customers discover their products and make purchases. We are very pleased with the performance of third-party seller services and are actively seeking ways to further support sellers.

Operator, Operator

Our next question is from Justin Post with Bank of America.

Justin Post, Analyst

Great. Can you explain why you chose to separate out advertising services if you haven't already? Also, how much did Prime Day contribute to the slowdown? Looking at the bigger picture, what potential do you see for that line to grow beyond GMV growth? How should we assess your current market penetration in that area? Thank you.

Brian Olsavsky, CFO

Yes. Let me start with why we broke it out. We’ve looked at the proportion of other revenue that is advertising services. And we got to a point where – and I had been pretty much mentioning every quarter that for the majority of that line item was advertising revenue. And we feel at a certain size that we should break it out and split the other half of that. So, that was really the impetus for the change. And we look at those things every year, and end of year was a good time to do it as we start 2022. So hopefully, that’s helpful for you to understand the growth rate without having to impute it from the other revenue. The growth rate in the quarter of 33% was down from 66% in Q4 of last year. Q4 last year obviously had Prime Day in it for the first time. And Prime Day carries a lot. I can’t scale it for you, but there’s a lot of advertising tied to Prime Day, obviously. So when that moves quarters, it generally has an impact on the run rates. We saw that a bit in Q2 of this year when we did have Prime Day and it was lapping – Q2 2021 was lapping, the 2020 period that didn’t have a Prime Day in it. So, that will move around a bit. But I think the bigger story here is the success we’re having with sellers and vendors, and making that a useful product for customers.

Dave Fildes, Director of Investor Relations

And Justin, just to add to that, I mean the priorities with advertising are – at a high level, it’s improved the tool usability. We think there’s great feedback loops with customers, as Brian mentioned, to keep building and making that better. That results in building more relevancy and better engaging experiences. And again, the more we can interact with the advertisers, the customers, and learn and have more opportunities to hear from them and understand that we can build better analytic tools, provide better measurement, give them better insight into performance. So, really focused on serving brands. And it’s in the sponsored ad space, but we’ve talked about video advertising is certainly a great opportunity. And as we’ve got properties like Fire TV, IMDb TV, Twitch, live sports, a lot of exciting things that have been going on in the live sports and certainly to come this year as well, both in the NFL here in the U.S., but overseas in a number of properties, really excited to kind of work with folks. And again, this is about delivering good recommendations to customers and helpful when they’re making their purchase decisions and giving them information around that. And that, in turn, of course, helps the advertisers as well and have a great result. So, I think that’s one area that we’re excited about. Longer term, demand-side platform opportunities with Amazon DSP is something that we’re continuing to work on and refine and again, focus on the customer as we always do.

Operator, Operator

Our next question is from John Blackledge with Cowen.

John Blackledge, Analyst

Two questions. First, could you discuss how the supply chain affected the business in Q4, and how we should think about perhaps impacts from supply chain issues in Q1 ’22 and for the year? And then, the second question would be, do you expect to increase Prime pricing in non-U.S. markets? Thank you.

Brian Olsavsky, CFO

Hi, John. Thank you for your question. First on the Prime question. We evaluate each country differently. We look at the relative price to the customer versus our cost to supply that and the usage and the value that we’re creating for customers. We felt, especially after not raising the price in the United States since 2018, that the time was right to raise it. And we think it’s a much more valuable program today than it was in 2020, let alone 2018. So, other countries we’ll continue to evaluate every year and nothing else to announce right now. On supply chain, there are specific things that I think we all see in the supply chain where we’re waiting for products. But as far as Amazon is concerned, we did a lot to combat the supply chain issues we saw in Q4 or anticipated in Q4. We bottled product ahead. We worked with vendors to secure inventory early, in some cases, paid earlier, which had a working capital impact. We also worked very hard to open up channels of – existing channels of input into the country, whether it was port capacity or vessel capacity. So, we did everything. We knew how to as far as trying to get more capacity in a constrained market. And we think it worked for our customers in Q4 as challenges remain in ‘20, I wouldn’t say we’ve totally passed that, but we don’t expect it to be a big issue in Q1.

Operator, Operator

Our final question is from Dan Salmon with BMO Capital Markets.

Dan Salmon, Analyst

First, I just wanted to follow up a little bit and see on the advertising numbers, if there’s any qualitative color that you could add, say, rough balance of performance advertising versus brand advertising, maybe U.S. versus rest of the world. Anything you add could be great. And then, just second, Brian, you mentioned the exclusive broadcast of Thursday Night Football and is one of the reasons supporting a higher price increase for Prime. Dave, you mentioned it as an element that is a dynamic new one for the advertising business. Maybe could we just return to that point as the sort of importance of live sports in the video space is incredibly important, is that one that you see kind of taking the business to a new level at this stage?

Brian Olsavsky, CFO

Sure. Let me start with that second question. So, I didn’t want to leave you with the impression that we raised prices because there’s any football. I just use that as an example of great new content that we’ve been investing in for Prime members to make the Prime membership more valuable as well as international sports, we had one of the highest rated games in Q4 with, I believe, is Manchester United and – I’m going to mix up the team, sorry.

Dave Fildes, Director of Investor Relations

Arsenal, I don’t know.

Brian Olsavsky, CFO

Yes, I won’t embarrass myself. But, the – so again, we’ve been working on getting sports properties that will be beneficial and valuable to Prime offering. We’re still probably early on in that. We’ve had obviously success with Premier League Soccer, other soccer leagues around the world, Tennis properties and also probably the marquee is the work with the NFL on Thursday Night Football.

Dave Fildes, Director of Investor Relations

Dan, in terms of just breakout, I think as we’ve said before, on the advertising side, the sponsored products and brands, they make up the majority of the ad revenue today. We haven’t given a split on a geographic basis. But suffice to say, a lot of these efforts, Brian talked about, whether it’s on the video, advertising opportunities for – in those sponsored products and sponsored brand efforts, we’ve replicated a lot of the tools and features and services around the world and are kind of constantly learning and building out the brand and the presence with that so we can make better inroads with customers over the long term.

Brian Olsavsky, CFO

And because I don’t want to leave you hanging, Dan, the Manchester United and Arsenal soccer game in December was the most watched Premier League match ever on our service with an estimated viewership of 4 million. So, I think that is actually pretty interesting because we’ve had a lot of increasingly good relationship with the Premier League. We’ve had Boxing Day games, and we continue to be a valuable partner for each other.

Dave Fildes, Director of Investor Relations

With that, thanks for joining us on the call today and for your questions. A replay will be available on our IR website for at least three months. We appreciate your interest in Amazon and look forward to speaking with you again next quarter.