The justification for the Prime price hike — going from £49 ($81) to £79 ($131) in the U.K., and from €29 ($40) to €49 ($67) in Germany — is that customers in these countries will now have access to Amazon’s LOVEFiLM streaming collection as part of their Prime membership. Previously, Prime only included expedited shipping and access to the Kindle Lending Library.
Of course, Prime members in the U.S. have had access to streaming video content for quite some time, and it was offered at no additional cost beyond the $79 annual fee.
And it’s worked out well for the company. In its recent quarterly earnings report, Amazon says there are now “tens of millions” of Prime members around the world. The company has never provided specific numbers on Prime subscribers.
Keeping that many people happy requires investment in content. Amazon said it recently increased its Prime video library in the U.S. from 33,000 titles to 40,000, and it is currently in the process of launching a second series of original shows. It also requires investment in technology in order to deliver quality streams across numerous platforms.
It’s possible that the price increases overseas are just bringing fees up to the same profit level Amazon makes off U.S. Prime members, but it seems more likely that it’s an indicator of changes to come stateside.
What may be biting Amazon in the butt is its annual fee model. People see headlines about $20 or $40 price increases and — understandably — their immediate response is often a negative reaction. Whereas, were Amazon talking about going from $6.59/month (the current level, if you broke it down into monthly payments) to $8.25 or $9.92 a month, people may not be so quick to charge the Amazon gates with torches and pitchforks.
What’s interesting about the European price increases is that Amazon is allowing people to lock in existing rates if they sign up in the next couple weeks. Additionally, it is continuing to offer LOVEFiLM as a standalone streaming service for customers who don’t want to pay for the Prime benefits.
Amazon will have to raise the price for Prime at some point (or begin offering tiers of Prime service) and some members will undoubtedly quit the program, whether out of anger or because they don’t see the value in Prime anymore. But if Netflix could make it through the whole Qwikster debacle, which saw the company split its DVD and streaming services and effectively doubled the monthly rate for customers who wanted both, Amazon will probably survive a Prime price increase.