Why Amazon just sent you an email about ads on Prime Video

By CNN Newsource

Published December 28, 2023 6:30 AM

By Jordan Valinsky and David Goldman, CNN

New York (CNN) — Amazon emailed its millions of Prime members this week, alerting them to an upcoming change to the streaming service that will leave customers with two options: pay more or watch ads.

Starting January 29, Prime Video will feature “limited” advertisements, Amazon said in its email. To avoid ads, customers will have to pay $2.99 a month more. Amazon first announced the change in September.

“This will allow us to continue investing in compelling content and keep increasing that investment over a long period of time,” Amazon said in its email to Prime members this week. “We aim to have meaningfully fewer ads than linear TV and other streaming TV providers.”

Amazon is hardly alone in making the change. Prime Video is joining most other streaming services by inserting ads into its programming and raising prices on ad-free tiers.

Netflix in October said its premium ad-free plan in the United States will increase by $3 per month, to $22.99. Its one-stream basic plan rose to $11.99 in the United States. All other plans, including its entry-level, $6.99-a-month ad-supported tier, remained at the same monthly cost.

In August, Disney+ increased prices for the second time in less than a year, with the monthly cost of its ad-free plan rising to $13.99 in October — a $3 increase. Hulu, in which Disney owns a majority stake, will also hike its monthly ad-free subscription $3 to $17.99.

Max, owned by CNN parent company Warner Bros. Discovery, raised prices in January 2023 by $1 a month — its first-ever price hike. And Peacock, owned by NBCUniversal, also had its first-ever price hike in July.

The price hikes come as streaming companies search for additional revenue. Consumer demand for streaming services has slowed dramatically since the pandemic, cutting into streamers’ revenue growth. Meanwhile, the cost for producing shows has risen, and it will continue to go up as the actors and writers’ new negotiated contracts kick in. Raising prices is one way to solve streaming companies’ financial issues.

When Amazon first announced the change in September, it explained that ads will help it continue to produce popular programs, such as “Thursday Night Football.” Spending on Amazon’s content, which includes its original series, soared nearly 30% in 2022 to $16.6 billion.

The company didn’t reveal how long the ad breaks will be. Prime Video, which is home to “The Marvelous Mrs. Maisel” and “Citadel,” is included in the $139 yearly Prime subscription.

Streaming services are no long chasing subscribers, but rather investors are pressuring them to make money off the services, even if it comes at the expense of losing subscriptions. As a result, they are selling ads or hiking monthly prices.