Amazon Prime is one of the most popular subscription services, offering a vast library of movies and TV shows, free two-day shipping on many items, exclusive discounts at Whole Foods stores, and other perks like photo storage and gaming perks. But it doesn’t come without a cost: the service costs $119 annually in the United States.
But starting next year, Amazon (AMZN.O) will join streaming rivals in rolling out ads and introducing a higher-priced ad-free tier. In announcing the change on Friday, the U.S. tech giant said Prime Video users will see ads on some content in early 2024, and a premium ad-free option will be introduced later in the year, with pricing to be announced then.
The move comes as the industry grapples with a slowdown in subscriber growth since the pandemic, as consumers cut back on entertainment expenses. Several streaming companies have also raised prices this year as they grapple with increased production costs and a shift from traditional ad sales. Netflix and Walt Disney have recently introduced ad-supported paid tiers, while Apple TV+ remains the only central streaming platform to employ a pure subscription model.
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For Amazon, adding limited ads on its Prime Video service is part of an effort to generate additional revenue. The company has spent the past few years mounting a large advertising offensive on its media platforms, including live sports, such as Thursday Night Football, and sibling streaming apps like Freevee and Twitch. But it will be the first time that ads will be included on Prime Video, including the $119-a-year membership fee and free shipping on goods and streaming music.
Prime Video has a vast library of movies and TV shows featuring Amazon Originals like The Marvelous Mrs. Maisel and various other popular offerings, as well as a robust selection of classic movies and television. It’s a big reason it has become one of the most popular streaming services in recent years, even as it’s faced competition from many other offerings, including Netflix and Disney Plus.
Amazon will notify subscribers a few weeks before the ad debut with instructions on signing up for ad-free viewing, which will be available at no extra cost. Ads on Prime Video will only appear on some content, including live event broadcasts of football and other sports, which will continue to be ad-free for Prime subscribers. The company said it won’t raise the price of its Prime subscription, but users will have to pay another $2.99 per month for the ad-free tier in the U.S., where a Prime subscription costs an average of $25 per month when combined with Prime Video and Prime Music. Prime subscribers will receive an email with details on the ad-supported version of the service in early 2024. The company will share details on other countries’ pricing for international users later.