Amazon has revamped its Prime membership structure to include Netflix-style monthly subscription access.
For $8.99 per month, consumers may subscribe to a standalone version of Amazon Prime’s entertainment streaming service, and for $10.99 per month, they can access all Prime benefits, like free two-day shipping, Prime Now one-hour delivery in some cities, music streaming and photo storage. The cheapest option remains the annual $99 membership, which includes all Prime benefits.
Amazon has recently begun to catch up to video streaming platform Netflix when it comes to exclusive and original streaming content, snagging access to older HBO shows as well as the critically acclaimed "Mr. Robot." Amazon's own original programming, like "Transparent" and "Mozart in the Jungle," have garnered critical praise, awards and viewer buzz.
Amazon continues devising new ways to entice consumers to become Prime members, and for good reason: Prime membership is a retailer’s dream.
A good portion of wealthier Americans already shell out $99 each year to belong, and so are more likely to shop there, according to recent data from investment firm Piper Jaffray. Research also shows that Prime members are extremely sticky. Nearly three quarters (74%) convert compared to 13% of non-Prime members, according to a study last summer from Millward Brown Digital. That study estimated that half of all U.S. households would be Amazon Prime members by 2020, something that’s already been reached already if the Piper Jaffray numbers are to be believed.
The perks that Prime members enjoy—most notably two-day delivery and entertainment streaming services—are going far in keeping those customers at Amazon. That's critical at a time when Amazon appears to be increasingly moving on from competing on price.
One question facing Amazon is whether there’s a point when its costs start to matter. Amazon’s shipping and fulfillment costs, up 37% year-over-year in Q4 to $1.8 billion, are growing faster than its revenue, which increased 22% to $35.7 billion in the same period. So far it has focused on taking steps to make those operations more efficient, rather than scaling back on its fulfillment and delivery offerings to Prime members.
Yet another question is whether Amazon Prime members will stop caring about price. It’s unclear whether Amazon’s push to replace discounts with conveniences like same-day delivery will ultimately work for customers. Amazon taught them in the first place to find discounts, after all.