Amazon is working on a free version of Prime Video, its film and TV streaming service. It would be supported by advertising and will provide an additional venue for shopping and payments for the already huge e-commerce company.
The company is currently in talks with TV, film and digital media firms to bring both back catalogs and new, original content to Prime Video with its 50 million subscribers as a bargaining chip.
A video service paid for by advertisers is the opposite of its current subscriber paid service, but there is good reason for advertisers to take an interest, since it would provide another venue for consumers to shop and make payments.
Currently, Prime Video users only experience occasional Amazon product focused ads, but the new tier would give marketers another channel to get their products in front of Amazon’s loyal and frequent customer base.
In other words, in a world where consumers are tuning out TV ads easier than ever before with streaming services like Netflix, it would give advertisers a new platform to be in front of millions of people who like to shop.
Amazon knows that about half of all online shoppers start their product searches on the site and it also can easily target certain shopper segments. To effectively serve ads, Amazon may give up data on its customers, something it has never done before.
Amazon is no stranger to the advertising business. While it currently only makes up a sliver of Amazon sales, it still generated $1.4 billion in 2016 and could reach $2.4 billion by 2019.
In addition to embracing the impact that ad sales could have in their own right, why would Amazon rethink it’s current streaming video service? We think it goes deeper, just like with Prime Day. We believe this is about Prime Video (and ultimately Prime) member acquisition.
It’s no secret that Prime members are Amazon’s most valuable customers. They shop more often and spend more when they do. Prime is the greatest premium loyalty program of all time.
Why is this?
Prime brings a lot of value to its members’ everyday lives and they have enjoyed an ever-increasing suite of benefits. Prime has become integrated into the daily lives of an estimated 80 million people, and that’s what builds customer loyalty around Amazon. The money that Amazon loses in Prime benefits, it more than makes up for with increased AOV and frequency from members.
Movies and TV shows are a huge driver of Prime joins, so a free version of Prime Video could be the hook that gets more non-members in the door.
Once they are in the Prime ecosystem and experience all the benefits, Amazon is probably betting they’ll stay. 91% of members renew for a second year, so we would tend to agree.
From discounted Prime memberships for people on government assistance and students to disrupting the grocery and fashion industries, finding more markets is part of Amazon’s growth strategy. The more Amazon is in peoples’ lives, the easier it is to convert them into Prime members, and we think this free video tier could be Amazon’s latest strategy to do just that.