Growth Seeker holding Amazon (AMZN) is serious about growing its Amazon Prime subscription service, announcing that it will be offering the digital media content available on Amazon Prime as a standalone service similar to what is offered by Netflix (NFLX) and Hulu.
U.S. customers will now be able to purchase a subscription to Amazon Prime Video for $8.99 per month. The full package for Amazon Prime is $99 annually.
This is the second tweak Amazon has made to its Prime subscription model in recent weeks. Amazon also recently announced a partnership with mobile carrier Sprint (S) that allowed Sprint customers to purchase a monthly Prime subscription for $10.99. While that price comes to a 12 month total $33 higher than a regular annual subscription, it does allow customers to cancel the service any time they want.
"Stepping back, we see the pricing between these two monthly Amazon offerings as a way to entice prospects to sign up for Prime over the video service. For $2 more with Prime, a monthly subscriber gets all the perks of Prime (free shipping, music, Kindle library books, and more) as well as Amazon Prime Instant Video," wrote Growth Seeker portfolio manager Chris Versace. "We would not be surprised if some Prime fence sitters "do the math" and take advantage of the cheaper annual subscription fee."
Amazon's customer loyalty program has been an unmitigated success for the online retailer. As of the end of 2015, Amazon Prime had 54 million subscribers in the U.S., according to a survey conducted by Consumer Intelligence Research Partners. According to the research firm, about 47% of Amazon shoppers are Prime members.
"While Amazon Prime continues to grow nicely, growth slowed somewhat compared to earlier periods," said Mike Levin, partner and co-founder of CIRP. "We expect this, as the program matures in the US. So, member retention becomes even more important. Many see free two-day shipping as the primary reason customers try Amazon Prime, enhanced streaming video and other offerings provide added incentive for members to continue to renew."
The firm calculated that Prime members spent on average $1,100 annually on Amazon, compared to about $600 annually for non-members.
It remains to be seen whether Amazon Prime Video will be able to put a dent in Netflix's dominance of the digital streaming space. Netflix has about 45 million subscribers in the U.S.
"The bottom line is we see this as another step in the company's strategy to grow its Prime subscriber base. We'd note that Amazon's strategy is to unveil these new offerings in the US before launching them in other markets outside the US," Versace concluded.
So while domestic growth rates for Prime have begun to slow, according to CIRP, the company has not yet unveiled its plans to expand these services internationally. More details about Amazon's international strategy are sure to be forthcoming, maybe even as soon as the company releases its quarterly financial results on April 28.
Gun to your head, which streaming service do you choose? https://t.co/tdLEy8pvtB¿ RealMoney (@TSTRealMoney) April 18, 2016