Amazon. one of the largest companies on Earth, used to have a total of 1.5 million employees globally. However, it recently laid off hundreds of employees, so that number has fallen.  In its announcement, Amazon said that it would be initiating significant layoffs within the Prime and MGM departments. And the memo explaining exactly why they’ve taken such a step has been making rounds on the internet.

In 2023, Amazon laid off a whopping 27,000 employees for two reasons. The first is that they hired too many people during the pandemic and now need to scale back.  The second is that they are also not immune to the ever-rising rate of inflation in the nation. 

Amazon is currently valued at $1.5 trillion, and while its stock fluctuates on most days. The share price has been steadily increasing over the past few years. It has many wondering why are they making huge cuts to their staff when things are going so well for their company. 

Amazon, as a whole, is still doing well, considering the current economic climate. However, it is clear that certain factions within the business aren’t doing as well as much as was expected. The layoffs are occurring within the Prime Video and MGM divisions, which are floundering financially due to some big financial mistakes. But it’s actually Amazon’s entire entertainment operation that is drowning. 

Buying MGM was a big undertaking. The action set Amazon Prime back a whopping $8.5 Billion and is the first mistake that landed them in this mess.  Financial experts now argue that the recent setbacks Amazon is experiencing are due to issues from the purchase. 

Some believe that the cutbacks are also due, at least in part, to Prime Video’s decision to splurge $465 million on a single season of a television show. Prime Video had high hopes that the huge investment in “The Lord of the Rings: The Rings of Power” Season 1 would return incredible profits, but things did not play out like that. 25 million people watched the first episode, but reports say far fewer made it to the end of the season.

Prime Video has faced its share of issues in the past couple of years, however it was still surprising to many that they’re letting so much staff go.  Prime Video’s senior vice president, Mike Hopkins, made the announcement through a company-wide memo. It doesn’t explain precisely why they’re doing this, but it does give some insight into the situation. 

Mike’s memo begins with positive words, highlighting all Prime Video has been able to accomplish in recent years, citing partnerships and the purchase of MGM. It reads, “We’ve taken significant steps towards our long-term vision of making Prime Video the first-choice entertainment destination for customers worldwide, and I’m proud of everything we’ve accomplished as a team to date.”

In the second paragraph, he wrote, “Yet, at the same time, our industry continues to evolve quickly, and it’s important that we prioritize our investments for the long-term success of our business while relentlessly focusing on what we know matters most to our customers.” He continued, “Throughout the past year, we’ve looked at nearly every aspect of our business with an eye towards improving our ability to deliver even more breakthrough movies, TV shows, and live sports in a personalized, easy-to-use entertainment experience for our global customers.”

Within the deep assessment of the business, Amazon realized they needed to cut costs, and the lay-off was the best way. Mike shared, “As a result, we’ve identified opportunities to reduce or discontinue investments in certain areas while increasing our investment and focus on content and product initiatives that deliver the most impact.”

The memo continues, “We will be eliminating several hundred roles across the Prime Video and Amazon MGM Studios organization,” and that those losing their jobs would receive the notification by the next morning. Mike also stated that it was a “difficult decision to make” and that he and his team “do not take [it] lightly.”

According to the memo, all affected employees will receive “a separation payment, transitional benefits as applicable by country, and external job placement support.” It didn’t specify exactly what kind of severance package the dismissed employees would receive. But historically, Amazon has offered 60 days of full pay and benefits.

At the end of the memo, Mike wrote, “Our prioritization of initiatives that we know will move the needle, along with our continued investments in programming, marketing, and product, positions our business for an even stronger future.” Many have interpreted this to mean that Prime Video will be spending resources on encouraging more sales and improving program technology.