Amazon (AMZN) is jacking up the prices of its Prime membership monthly plan by nearly 20 percent.
According to Variety, the tech company is upping its price from $10.99 per month to $12.99 per month, an 18 percent increase. Though Amazon Prime does come with a free-shipping program, we’re most interested in how this impacts Prime Video, if at all, and how it all compares to rival Netflix.
Per the outlet, the annual Prime cost in the U.S. will remain at $99 per year following Amazon’s most recent pay increase four years ago. The company also offers a Prime Video-only subscription for $8.99 per month. This price change comes as the company’s streaming branch prepares a strategic shift that will see increased spending on originals and a greater focus on broad genre hits.
Remember, the service is poised to roll out a Lord of the Rings TV series in the near future, which could end up being the most expensive show ever made.
Amazon Prime Video’s biggest competitor, market-leader Netflix (NFLX), rolled out its third price increase in the last three and a half years in late 2017. The streamer upped its $9.99/month plan to $10.99/month and its $11.99/month plan to $13.99/month. However, both Amazon and Netflix have room for further price hikes, which should be expected by consumers, with cbs’ Showtime over-the-top (OTT) service costing $11 per month and Time Warner’s HBO Now at $15 per month.
“In general, they’ve got pricing power because of their loyal user base,” Mike Kelly, CEO of Kelly Newman Ventures, told Observer. “To be honest, they’ve most likely raised their prices simply because they can.”
Amazon is estimated to have around 80 million worldwide Prime subscribers, with roughly half that number estimated to be using the Prime Video service. In February 2017, the company said it generated $6.4 billion in revenue off of its retail subscription services. According to Variety, the company spent $4.5 billion on content in the last year.
Netflix has 109.25 million subscribers worldwide, including 52.77 million in the U.S. It invested $6 billion into content in 2017 and is prepared to spend as much as $8 billion in 2018. The company is currently growing at a rate of around 4 million new subscribers per quarter.
