Amazon's Email: A Sneak Peek into Prime Video's Advertising Strategy

Amazon sent out an email to its millions of Prime members this week, informing them about a forthcoming update to the streaming service. The update will offer customers two options: paying a higher fee or watching advertisements.

According to the email from Amazon, starting on January 29, Prime Video will include "limited" advertisements. To opt out of watching ads, customers will need to pay an additional $2.99 per month. The change was initially announced by Amazon in September.

Amazon stated in an email to Prime members this week that they will be able to maintain their investment in engaging content and continue to increase it over the long term. They also mentioned their goal of having significantly fewer ads than traditional TV and other streaming TV providers. This shift is not unique to Amazon, as most other streaming services are also implementing ads into their programming and raising prices on ad-free options.

Netflix announced that its premium ad-free plan in the United States will be increasing by $3 per month to $22.99, and its one-stream basic plan will now be priced at $11.99 in the United States. All other plans, including the $6.99-a-month ad-supported tier, will remain at the same monthly price.

Disney+ also recently raised its prices, with the monthly cost of its ad-free plan increasing to $13.99 in October, marking a $3 increase. Hulu, which is majority-owned by Disney, will similarly be raising its monthly ad-free subscription by $3 to $17.99.

Warner Bros. Discovery, the parent company of CNN, increased Max's prices by $1 a month in January 2023, marking its first-ever price hike. Similarly, NBCUniversal's Peacock also experienced its inaugural price increase in July.

These price adjustments coincide with streaming companies' pursuit of additional revenue, as consumer demand for streaming services has significantly declined since the pandemic, impacting streamers' revenue growth. Concurrently, the expenses associated with producing shows have escalated, and they are anticipated to continue to rise as new contracts for actors and writers are enforced. Consequently, implementing price hikes serves as one approach to address the financial challenges faced by streaming companies.

Upon announcing the change in September, Amazon clarified that the introduction of ads will support the continued production of popular programs like "Thursday Night Football." Its expenditure on content, including original series, surged by almost 30% in 2022 to reach $16.6 billion.

The company did not disclose the duration of the ad breaks. Prime Video, which features "The Marvelous Mrs. Maisel" and "Citadel," is part of the $139 annual Prime subscription.

Streaming services are now being pressured by investors to generate profits from their services, even if it means sacrificing subscriptions. Consequently, they are resorting to selling advertisements or increasing monthly fees.