Amazon Mulling Up to 50% Price Hike for Prime, But Denies Rising Video Costs Play a Part

Amazon Mulling Up 50% Price Hike

Amazon.com’s battle with Netflix to land streaming-video rights is costing the e-retailer millions — but Amazon claims those costs are not figuring into a potential 25% to 50% price hike for the Prime free-shipping program.

CFO Tom Szkutak, on Amazon’s fourth-quarter earnings call Thursday, announced that the company is contemplating raising the cost of Prime in the U.S. by $20 to $40 per year — up from $79 currently, a price point that hasn’t changed since Amazon debuted the program in 2005.

Szkutak cited shipping costs, and noted Prime members are ordering more items with free two-day shipping: “Even as fuel and transportation cost have increased, the $79 price has remained the same.”

Meanwhile, there’s no doubt that the costs associated with Prime Instant Video are climbing as usage on the service has grown and more content comes into the pipeline. Amazon recently has cut deals with CBS, NBCUniversal, Turner, Warner Bros. Domestic TV Distribution, PBS and Viacom, among others. Plus, the Amazon Studios arm is continuing to invest in content, gearing up for a wave of kids’ series launches and a second round of pilots.

Amazon vaguely says it had “tens of millions” of Prime users worldwide as of the end of 2013. That implies at least 20 million members. But the company offers Prime in many countries, including Canada, the U.K., Germany, France, Japan, Spain and Italy, so it’s not clear how many U.S. subscribers it has. Regardless, Amazon’s streaming-content costs are without question on the rise.

Szkutak, however, specifically denied that TV and movie licensing pacts are part of the consideration: “Certainly video, Prime Instant Video we are investing (in) very heavily, and so those are certainly costly. Those aren’t the reasons for the price increases that we’re contemplating.”

It’s worth noting that if Prime increased to $99 annually, that would be $8.25 per month — just a 26 cents more than Netflix’s $7.99 price point.

Netflix, meanwhile, is pondering its own price moves. The company last April introduced a four-concurrent stream “family” plan at $11.99 per month, and in late 2013 began testing two additional options: a $6.99 single-stream, standard-def only plan and a $9.99 three-stream variant. The $7.99 plan provides up to two concurrent HD streams.

Szkutak also was asked whether Amazon would at some point offer Prime in different tiers — and whether the company would break off Prime Instant Video as a standalone service. He wouldn’t take the bait. “I wouldn’t speculate,” Szkutak replied. “We might or might not do in the future, but we like the Prime program where we have invested very heavily in it.”

SEE ALSO: Amazon Denies It Has Plans to Create an Over-the-Top Pay-TV Service

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  1. I’m a current Prime member. Don’t know if I will be for more than $79.
    http://www.chrisinnewberg.blogspot.com

  2. Nathan Steyn says:

    Apparently fuel and delivery costs only went up in the U.S. In other countries, Prime will stay the same price (about $79).

    There is no video included in Prime outside of the U.S.

  3. TVDude says:

    “Even as fuel and transportation cost have increased”

    No they haven’t. A lot of things have increased, but fuel has been rather even.

    I was debating renewing Prime so if they raise the price, it’ll be an easy decision.

    • The Chad says:

      That extra $1.67 a month is a deal breaker, huh? With unlimited 2-day free shipping and all the streaming content they offer, I still think $8.25 a month is a major steal.

      • TVDude says:

        Like I said, I barely think Prime’s a good deal now and this would be a deal breaker.

        I suppose it is a good value for some people, like you, but I can get free shipping easily by grouping things together to make it to $35. I never really need anything in two days that I buy from Amazon (plus standard shipping usually gets here in four days, so I only have to wait two more days). I already have Netflix and find anything exclusive on Amazon to be unappealing to me (and my family).

        I would rather save $100 a year and get things two days later. The streaming is of little value to me and I won’t miss it, as no one here uses it.

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