essay
1. Amazon Raises Prime Subscription Price To $99 A Year; Move Represents First Increase in the
Shipping and Video-Streaming Service’s Nine-Year
History……………………………………………………………………………… 1
05 May 2014 ii ProQuest
Document 1 of 1
Amazon Raises Prime Subscription Price To $99 A Year; Move Represents First Increase in the
Shipping and Video-Streaming Service’s Nine-Year History
Author: Bensinger, Greg
ProQuest document link
Abstract: Netflix Inc. has boosted its membership rolls since dividing pricing plans for its DVD-by-mail and
streaming services in 2011, which resulted in a price increase for some customers.
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Full text: The cost of free shipping is going up.
Amazon.com Inc. said it will raise the annual price of its Prime shipping and streaming-video service by $20 to
$99, the first increase in its nine-year history.
The Seattle retailer said the 25% increase was needed to offset rising delivery and content-acquisition costs.
The $99 price takes effect for new members on March 20. Existing Prime members will pay the higher rate
when they renew.
Shipping costs have been a particular concern for Amazon as it builds more warehouses closer to urban
centers and expands its same-day delivery options. Shipping expenses jumped 29% last year, to $6.6 billion,
while revenue from shipping services rose 36%, to $3.1 billion.
In January, Amazon said it was considering raising Prime fees by $20 to $40 per year. Analysts said Amazon
likely chose the lower end of the range so as to upset the fewest users. A spokeswoman declined to comment
beyond the announcement, which was emailed to customers and posted to the Amazon.com homepage.
Investors applauded, as Amazon shares eked out a small gain on a day when stock indexes fell.
Analysts said they expect fewer than 10% of the more than 20 million Prime members to drop their accounts.
Including additional spending by Prime members, the change could generate between $150 million and $300
million in operating income annually, analysts predicted.
“We see little likelihood of meaningful churn from the price increase,” said Colin Sebastian, a Baird Equity
Research analyst.
Prime is valuable for Amazon not just because of the annual fees but because members tend to spend
significantly more on the site. Market-research firm Consumer Intelligence Research Partners last year
estimated Prime members spend more than twice as much–$1,340 per year–than non-Prime members using
Amazon.
Mr. Sebastian and other analysts said similar recent price increases had prompted few cancellations. Netflix Inc.
has boosted its membership rolls since dividing pricing plans for its DVD-by-mail and streaming services in
2011, which resulted in a price increase for some customers.
The price increase means Prime will cost 26 cents more per month than Netflix’s streaming service–but include
free two-day shipping on many Amazon purchases.
Amazon has been adding benefits to the Prime program in the U.S., including an e-book lending library and an
expanded video catalog, including exclusive shows. This week, Amazon chose four new television series it will
produce in-house that will be available exclusively to Prime members.
Amazon is in discussions with about 10 retailers that don’t otherwise sell goods on Amazon.com to list their
wares on the site with Prime shipping, people familiar with the talks said last month. It is also considering a
streaming music service connected to Prime, people briefed on those discussions told The Wall Street Journal
this week. And it is close to releasing its long-rumored set-top box, which may offer benefits to Prime members.
At least one rival jumped on the news of the Prime price increase. ShopRunner Inc., which guarantees two-day
05 May 2014 Page 1 of 2 ProQuest
delivery from several dozen retailers like Timberland and Nine West, offered to waive its $79 annual fee to
Prime members “disgruntled” by Amazon’s decision. The promotion will last for “a limited time,” the company
said, declining to be more specific.
New Prime members can lock in a $79 rate for the first year by signing up before March 20, according to
Amazon. The company posted a clock on its site showing the remaining time.
Credit: Greg Bensinger
Subject: Customer services; Price increases;
Company / organization: Name: Netflix Inc; NAICS: 532230, 443142; Name: Amazon.com Inc; NAICS: 454111
