Chief Financial Officer Brian Olsavsky said late Thursday that starting on May 11, the annual price of Amazon Prime will rise from $99 to $119 for new members. Amazon’s share prices increased by 7 percent following the release of the quarterly earnings, the company has seen a stock price increase of 30 percent over the past year.
Analysts and observers said the move won’t materially affect Prime’s membership based on the program’s stickiness and deep infiltration into the fabric of consumers’ lives.
New Prime members in the US will be charged the higher fee starting May 11.
Olsavsky also said that while Prime is more valuable than ever to customers, its cost to Amazon is high, given the shipping and digital benefits that come with Prime.
“There are three great deals in America today – the Happy Meal ($3.29), Netflix ($10.99), and Prime (even @ new price of $119 – up 5 Grande Lattes…a year)”, wrote RBC Capital Markets analyst Mark Mahaney.
This is the first Prime membership cost spike since March 2014 when it increased from $79 to $99. Overall Amazon spent $21.7 billion on shipping in 2017, almost double that of 2015.
Amazon is planning to raise the cost of its annual Prime offering, which includes the video service, as it also intends to increase its spending on content.
The price increase of Prime membership will generate an additional $2 billion in annual sales for Amazon, about one percent of its total. Monthly Prime Student members continue to pay $6.49 per month. He expressed confidence in the value of the service despite the new price, noting that Prime’s two-day shipping offer has been expanded to 100 million items from 20 million in 2014.
As much as I hate it, I think Levin is right. However, the list of benefits already included Amazon Video streaming, the ability to borrow certain popular Kindle e-books for free, Prime Music ad-free streaming as well as Amazon Prime Photos unlimited photo storage. With more than 100 million Prime members around the world, this increase will apply to a tremendous number of households. Bezos’ plan for Amazon’s cloud services must be paying off as the results show. Earnings per share were $3.27, more than double the Reuters estimate of $1.26 per share. It’s however, worth highlighting that the new pricing will be effective for its new Prime subscribers starting May 11.