Is There Room for Amazon Prime Video Plus?
UPDATE - A thoughtful reader reached out to ask: what percent of Amazon Prime members are frequent Prime Video users and what percent are infrequent or non-users? We have updated this report to include that important data.
About a year ago, Amazon launched Freevee, an ad-supported streaming video service open to everyone - not just Amazon Prime members. Last week, The Wall Street Journal reported that Amazon plans to add an ad-supported tier to Prime Video. Apparently, advertisers are eager to get placement during premium shows and movies, and apparently Amazon is ready to add that revenue stream. Amazon’s success as a production studio empowers them to capture this revenue stream.
The profit motivation for this move is clear, and we think any customer dissent will be modest. Streaming video customers are used to commercials. Some percent of viewers choose streaming services or service tiers that include commercials. Even the most premium memberships include previews and promotions of other programming, which is really just “house” advertising.
Soon after Amazon launched Kindle and Fire devices, they started sharing lockscreen ads - and the option of paying to remove those ads. And, other streamers like Spotify, Pandora, Hulu, and Peacock offer both ad-subsidized pricing and higher, ad-free pricing. We will not be surprised if Amazon creates an ad-supported tier of Amazon Prime Video programming, and then offers the ability to pay to avoid those ads.
If and when Amazon makes that second move, some interesting comparable data suggests it will succeed. Amazon will get paid by advertisers or viewers or both. We studied subscriptions to other similar paid streaming services - Netflix, Hulu, Max (formerly HBO Max), Disney+, and Apple TV+.
We divided Amazon customers into three groups: Amazon customers that do not have a Prime membership, Amazon Prime members that generally do not use the Amazon Prime streaming video service, and Prime members that regularly use the Prime video streaming service. Among Prime members, we defined frequent video users as those that watch Amazon Prime Video content “every few weeks” or more often. 55% of Amazon Prime members qualify as frequent Amazon Prime video viewers. Infrequent viewers are the remaining 45%, those who use it less than “every few weeks”, or not at all.
The regular viewers of Amazon Prime Video are active customers for many competing (or complementary) streaming video services (Chart 1).