LOS ANGELES: Amazon will increase the annual cost of Prime for US customers to US$119 (RM466) per year, up 20% from US$99 (RM388) currently – news coming after it blew the doors off revenue and profit expectations in the first quarter.
The price increase will take effect starting June 16 for existing Prime customers based on their renewal period, CFO Brian Olsavsky said on Amazon’s first-quarter 2018 earnings call. New members will pay the US$119 (RM466) price starting May 11. The company last raised the price of Prime in the US in March 2014.
Asked on the call why Amazon was raising rates now, Olsavsky cited rising costs because of higher shipping expenses and spending on digital content. “It’s really nothing more than looking at the state of the programme, and the high benefits it’s delivering,” he said. “There’s all kinds of new features we’ve continually added to the Prime programme. It’s much different than it was in 2014.”
Four years ago, Prime offered free two-day shipping on 20 million products in the US, Olsavsky noted. Today Amazon offers more than 100 million products in Prime available within two days, and many are available even faster than that – with same-day or two-hour delivery.
Last week, CEO Jeff Bezos announced in his annual letter to investors that Amazon had surpassed 100 million members worldwide for Prime. That was the first time the company had ever provided a specific Prime number. Amazon still doesn’t break out how many Prime members it has in the US or in other territories.
Prime members receive free shipping of two days or less on more than 100 million products, as well as access to Prime Video and Prime Music streaming, Prime Reading ebooks and other titles, and other perks. For example, Prime members can now earn 5% cash back on purchases at Whole Foods Market when using the Amazon Prime Rewards Visa Card from Chase. Amazon acquired Whole Foods for US$13.7bil (RM53.66bil) last year.
In addition to higher shipping costs for Prime, the company has been continuing to spend heavily on original programming for Prime Video. The company on Thursday renewed its deal with the NFL for Thursday Night Football live-streaming games for the 2018-19 seasons. In the first quarter, Amazon Studios greenlit series including Cortes from executive producers Steven Spielberg and Steven Zaillian and starring Javier Bardem, and Utopia, a series written by Gone Girl author Gillian Flynn. Amazon last year won the rights to a multi-season adaption of Lord of the Rings, its most expensive and ambitious original production to date.
Earlier this year, Amazon hiked the price of the monthly Prime plan in the US, from US$10.99 (RM43) to US$12.99 (RM51) per month. Amazon also offers a standalone Prime Video subscription option, which – for now – will remain at US$8.99 (RM35) per month.
Meanwhile, Amazon still offers a discount to students. The company will keep that unchanged at US$59 (RM231) per year for an annual Prime Student membership.
Amazon announced the US price hike for Prime’s annual plan after smashing Wall Street expectations for Q1. It reported US$51.0bil (RM199.76bil) in sales and net income of US$1.63bil (RM6.38bil) – more than double the year-earlier period – sending shares to record highs in after-market trading. — Reuters
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