UPDATE: How Big a Deal is Amazon’s Move to Limit Prime Membership Sharing?
The answer to that question is, it would be a big deal, but actually Amazon did not move to significantly limit Prime sharing after all.
Our initial report was based on the broad misunderstanding of Amazon’s September 1 emails to some paid Prime members and some people who were enjoying shared Prime benefits. In fact, Amazon is only eliminating a legacy program called “Prime Invitee” which ran from 2009 to 2015. That program, in the early(ier) days of Prime, allowed Amazon Prime members to share their free shipping benefit with a few other people. After Amazon ended it in 2015, those “Invitees” could continue to use the free shipping benefit, until the end of this month. According to Amazon, ending the program affects a few hundreds of thousands of “Invitees” that continued to use the free shipping benefit.
Confusion arose due to how Amazon communicated the change. Amazon emailed “Your Prime Benefit Sharing is Ending - Action Required” to some current paying Prime members and current Family sharing members who were not affected and should not have received that message. In contrast to legacy “Invitees”, the very current and thriving Family plan allows a Prime member to share all Prime benefits (not just free shipping) with one adult member of their immediate family and up to four children. Further, the emails referred to the legacy “Prime Invitee” (capital “I”) program, which could easily be confused for being an “invitee” (small “i”) within a Family plan.
A few days after those “Action Required” emails, the “invitees” (small “i”) with shared Family memberships received a subsequent “More Information About Your Prime Benefits” email. This explained that they were actually unaffected by the end of Prime Invitee, so “No action is required.” (The paying members who received the first “Your Prime Benefit Sharing is Ending” emails about their referrals did not receive a correction message.)
Amazon gave us this statement to clarify the situation:
A few hundred thousand customers who were already using Amazon Family but previously had used the Invitee program were erroneously emailed that they needed to convert to Amazon Family to continue sharing Prime benefits. Given they already had signed up for sharing Prime benefits through Amazon Family, we sent them a follow up email that no action was required.
So, it’s unfair to compare Amazon’s recent move to Netflix and Costco toughening their account sharing. Amazon ended an older, targeted sharing program that became obsolete, rather than broadly pulling back on Prime membership sharing.
Based on our understanding of Amazon’s goals with the Prime program, we think they actually seek to deliver full Prime benefits to more customers with the move. The “Prime Invitee” program shared only shipping benefits. Today, Amazon wants the Prime member experience to span all of the benefits, from streaming video to Grubhub+. Former “Prime Invitees” who become Prime “Amazon Family” members will have access to that full Prime experience.
This leaves open the question of Prime membership sharing. We continue to estimate there are in the low tens of millions of US Amazon customers who share a Prime membership with someone else. Though we try not to make predictions, we do not expect Amazon to crack down on Prime membership sharing. Amazon Family already limits sharing to one other adult, and theoretically that adult should live in the same place as the paying member.
Our initial, no longer current, report is below.
First Netflix cracked down on login sharing. By tracking simultaneous streaming and geolocating users, Netflix has been able to significantly reduce account sharing. That may or may not have increased their paid user base. More recently, Costco cracked down on membership card sharing by checking photos on membership cards and apps. There, too, it is unclear how many free-riders have converted to paid members. Of course, Costco members can still bring a guest or just “pick up a few things” for a friend.
Now it’s Amazon’s turn. For years Amazon has allowed and at times encouraged Prime members to share their shipping benefit with family members. “Family” members did not need to live in a single place to share a membership, so the opportunity was vast. Last week Amazon sent an email to primary Prime members with shared accounts warning them that soon their membership sharing would be limited to one person living at the same address.
Then, the current shared account customers (“invitees”) received an email with a generous offer. It was not as good as free, but they could get their own Amazon Prime membership for $14.99 for the first year. The email noted that is an 89% discount to a year of monthly membership payments.
For Netflix and Costco the primary goal of the crackdowns was increasing revenue. For Amazon the desire to increase membership fee revenue is even stronger, since there are very tangible costs to “free” delivery. Yet, we think Amazon’s goals are bigger than a simple boost to profit. As always, we think Amazon has more in mind.
About 70% of Prime members report they started their membership in a way that suggests they pay for it (Chart 1). 53% started with a free trial and another almost 20% joined through a specific paid membership - Mom, Student, or Prime Access. 11% said that they were invited by a family member and another 16% “don’t know”, some of whom presumably are also shared account users.