Amazon Prime offers subscribers free 2-day shipping, discounted overnight shipping, Amazon Instant Video streaming, and Kindle lending library privileges. And Prime’s been priced at just $79 a year for nearly a decade. The rate hike the retail giant is considering: $20 to$40 a year.
We posed the following question to our community via the Slickdeals website and our Facebook page : Would you pay more $20 or $40 more for Amazon Prime? As of today, 86% of respondents said they would not pay $20 to $40 more for Amazon Prime.
$20 Yes, $40 No
Not reflected in the numbers above are the handful of respondents that said they would pay $20 more for Prime but $40 more was too much, posting remarks similar to that of Slickdeals member UnitCS: “20 extra for sure...40 no”. Amazon’s brief mention of a price increase far in advance of it happening may be designed to mitigate a backlash similar to the one Netflix experienced when it first announced its price changes in 2011. When Amazon finally does increase its price, doing so by $20 would be less impactful to the consumer when framed against the larger $40 price increase.
Many respondents also suggested that Amazon move to a tiered pricing structure. Slickdeals member Core2Quad suggested a “Prime Lite”, where customers would be charged “$39.99 a year” with “no movies or e-books”. Amazon mentioned that it is considering a price increase because its incurring more charges on shipping as the program scales. Rather than passing on those costs to the customer, Slickdeals member slowmoz suggests that Amazon “unbundle the movies and books."
Maybe...If Customers Get More Value
Other respondents decided to take a wait and watch approach to see if Amazon would introduce new features or content to its Amazon Prime service (drones anyone?).
Facebook user Catherine Pfent commented that “If Amazon had all the shows and movies from Hulu and Netflix, and the 2-day shipping, then we would definitely pay for an increase.” Greg Higgins aptly pointed out on Facebook that a Netflix streaming subscription on an annual basis is $96, so if Amazon can match Netflix’s content library in size and quality, it wouldn’t be a stretch to pay close to $100 for Amazon Prime.
Facebook user Aayman Frazand would only consider paying more for Prime if Amazon moved to one-day standard shipping as opposed to the current two-day standard shipping.
Will Amazon Do It?
In raising the price of Prime, Amazon would be making a bet that long-term revenues from a more expensive Amazon Prime service would offset any short-term losses from the subscribers that cancel. If they proceed with a $20 increase, they could afford to lose 25% of its current subscriber base and still break even (not accounting for the loss or gain on product purchases that are associated with Prime membership or the effect a price increase would have on its stock price). If they increase the price by $40, they could afford to lose half its current subscriber base and still break even in the short run.
While the mention of a price increase on its earnings call was brief, it was certainly a carefully thought-out maneuver on Amazon's part. It is unlikely that Amazon would mention it if there wasn't some sort of price structure change in the works for Amazon Prime.