Prime Time for Amazon Prime

Many in the media are reporting that Amazon will be offering month-to-month memberships to Amazon Prime for $8 per month. Amazon Prime is a service offered by Amazon for an annual fee of $79. It includes free two-day shipping (on qualified items); Prime Instant Videos, which provides unlimited instant streaming of thousands of movies and TV shows; and a monthly Kindle book rental from the Kindle Owners’ Lending Library.

There are a variety of reasons the shift to a monthly fee in interesting. For the more casual Amazon user, it lowers the barrier to entry. Consumers may be unsure whether they will use Amazon Prime enough to get value out of the expenditure. It’s easier to rationalize an $8 “trial”, to see whether the value makes sense. For many, it will. The quicker shipping is a bonus for holiday shoppers, especially procrastinators. In fact, the coming holiday season makes Amazon’s timing even more interesting and it could be a way to improve Amazon’s share of year-end sales. Add a subscription to movie- and TV-show streaming and you’re showing your customer more value than the thought they could get. Even offering a free book each month encourages readers to take advantage of their e-readers and tablets, provides an incentive to make more downstream purchases, and could get newbies to try out digital books.

From a pure home-entertainment perspective, Amazon’s monthly plan brings the service more in line with competitive subscription video offerings from Hulu and Netflix, but with added bonuses. Netflix Watch Instantly dominates the paid digital video subscription market (93% of movie and TV subscription VOD), while Hulu and Hulu PLUS are the destinations of choice to watch recent TV shows. The monthly plan is an opportunity for Amazon to steal share and protect its home entertainment franchise – 83 percent of consumers who buy DVDs or Blu-ray Discs from Amazon also stream videos from Netflix.

The content offering from Amazon’s Prime Instant Videos is not quite as robust as Netflix’s offering, but Netflix had a head start. Amazon has two potential game changers:
1. It’s a one stop shop. While the streaming libraries are somewhat limited, especially for new movie releases, Amazon offers its customers both – Internet video-on-demand (iVOD) and electronic sell-through (EST) options. As a Prime customer, I have choice – if a title isn’t available via streaming, there’s the alternative to rent, buy, or simply choose to stream something else. So chalk this up as an advantage – maybe a big advantage – for Amazon.
2. Amazon is investing in content. Hulu’s selling point has always been about watching TV shows that aired just yesterday (or the week before). Amazon opened the wallet to obtain Epix content that is available on Netflix, and they have the wherewithal to make other important content deals.

Because Amazon does not report their subscriber numbers, estimates of Amazon Prime membership are vague, ranging from 5 million to 10 million consumers in the U.S. Rumor has it that Prime members also spend more at Amazon and are highly profitable to the retailer, which makes sense. Making Amazon Prime more accessible to the mainstream could improve the user numbers and help adoption of multiple forms of digital video. That’s a win for Amazon and for Amazon’s customers. For Netflix, it might mean some healthy competition.

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