POV: Amazon plans ad-supported tier on Prime Video

Background:

It’s been reported by The Wall Street Journal that Amazon is in the early stages of developing an ad-supported tier for Prime Video. The move comes as the company looks to expand its ad business and generate more revenue from entertainment, according to people familiar with the situation.

While the news remains unconfirmed by representatives at Amazon, the reports suggest the plans to introduce an ad-supported tier format are in the early planning stages.

The WSJ reports that Amazon is exploring various options for incorporating ads into Prime Video, including serving existing subscribers with ad-supported content with an option to pay extra for an ad-free experience and additional features.

Ad breaks are rumoured to be brief, but it remains unclear whether they will exceed three to four minutes of advertisements per hour and there is no information on how this may impact pricing of the service. Currently, subscribers pay $14.99 per month for Prime membership or $8.99 for a standalone subscription in the US.

Parts of Prime Video already feature ads, such as its platform’s NFL Thursday Night Football, and some shows carry product-placement advertising. Amazon also generates ad revenue from its free ad-supported streaming service Freevee.

Advertising has been an area of continued growth for Amazon. Despite economic uncertainties, its ad revenue was $9.5 billion in the first quarter of 2023, up 21% YoY.

Amazon would join other streaming platforms who have introduced ad-supported tiers, such as Netflix and Disney, so news of these plans comes as no big surprise.

Netflix revealed at its Upfronts event in May that its ads member base has more than doubled since early this year and that is has over 5 million monthly active users subscribed to ad-supported tiers globally. On average more than a quarter of new sign-ups to the platform are choosing ads.

Netflix also announced new advertising products at its Upfront, with brands now able to sponsor shows - a service available in the US first. Brands can also align themselves with collections, giving them the opportunity to do this around local holidays and also run sponsorship content at the start of an episode before it begins.

If reports are true then Amazon could be joining streaming platforms such as Netflix and Disney in offering an ad-supported tier. This shift by Netflix, seems to have early momentum after it reported a positive first six months of the new service. Whilst Amazon is yet to confirm the report, many brands will find the prospect of an ad funded Prime Video service an attractive one as Amazon has over 200m Prime subscribers globally.