Amazon spends billions of dollars every year on programming for its Prime Video platform and now it wants customers to pay up or get used to seeing ads on their favorite shows.
On Monday, the tech giant made ad-supported streaming the default on Prime Video for its more than 200 million subscribers. The company originally announced the plan in September, saying that it was needed, “to continue investing in compelling content and keep increasing that investment …”
Amazon claimed in its original announcement that Prime Video will show fewer ads than regular TV or other streaming services, but those who want to avoid them altogether will have to pay an additional $2.99 per month on top of the $14.99 monthly fee that already exists.
The change comes as the company has increased the amount it spends on content to fill out its Prime offerings. In 2022, the company finalized founder Jeff Bezos’ $8.5 billion purchase of MGM, in what was its second-most expensive acquisition at the time. Since then, Amazon has beefed up spending, including a $16 billion splurge on content in 2022, $7 billion of which went to original programming.
In the third quarter of 2023, the company’s most recent earnings report, Amazon made just over $10 billion from its subscription services unit, which includes Prime and other non-Amazon Web Services subscription services in digital video, audiobooks, digital music, and e-books. Experts predict that the new changes to Prime Video could provide an added boost.
Analysts at Morgan Stanley predict that the company’s changes could bring in an extra $3.3 billion in advertising revenue in 2024. Meanwhile, New York–based media investment firm MoffettNathanson had lower predictions but still said Amazon will bring in $1.3 billion from advertisers in 2024 and another $2.3 billion next year.
The company is predicting that 159 million of its subscribers will immediately be exposed to ads on the platform, the Wall Street Journal reported citing an internal presentation Amazon made for potential advertisers. That number may be enticing to companies looking to reach more eyeballs, as it beats out the 23 million monthly active users that are exposed to ads on market leader Netflix’s platform.
Still, Prime customers are mostly unhappy about the change and have taken to social media to complain about the new ads on the platform. Many have chalked up Prime’s ads rollout to corporate greed.
Prime video now has ads???@amazon @PrimeVideo why are you so greedy? #cancelprime pic.twitter.com/FjtKDGwnTS
— Ray Meyer (@rmeyer1126) January 30, 2024
I’m disappointed to hear that Amazon Prime Video is introducing ads. It’s a paid subscription service, and I expect an ad-free experience. This move may push users to explore other platforms.
— mariana velaz (@maribella343) January 26, 2024
Although customers are not happy with the new change, Wall Street’s push for profitability in streaming has caused companies to adapt their earlier business models. In December 2022, Disney+ introduced an ad-supported tier at the same time that it announced a $3 monthly price hike for its ad-free plan. It then hiked prices another $3 per month in August.
Netflix, which at 260 million subscribers worldwide has more than double the customers of any other streaming service, cracked down on password sharing, along with debuting its own advertising tier, in a bid to improve profitability. These helped Netflix, which is emerging as the undisputed winner of the streaming wars, crush its last earnings with the biggest boost of new subscribers since the pandemic. Of course, Netflix kicked off streaming’s pivot from growth to profitability by reporting a subscriber drop in 2022, contributing to the flood of advertising into streaming, now including Amazon Prime.
While the percentage of U.S. households that subscribe to streaming services had stayed between 80% and 83% each quarter for the past two years, the end of 2023 saw that number jump to 85%, exceeding expectations and spurring hopes that there is still more room to grow in the streaming sector.
Amazon did not respond to a request for comment from Fortune.
