Amazon has announced that beginning January 29th, its Prime Video streaming service will start showing ads during movies and TV show content for most users. Subscribers wishing to avoid ads will need to pay an extra fee for an “ad-free viewing experience.”
The move represents a major shift for Prime Video, which has been ad-free since its launch over 15 years ago. It comes at a time when many streaming services are adding ad support to boost revenue, following price hikes over the last year. However, the mandatory ads on Prime Video and fees to remove them break the value proposition that has attracted over 200 million Prime members so far.
Ads Arriving January 29th With No Way To Avoid Initially
Amazon quietly announced the launch date for Prime Video ads in a press release on December 28th, giving users about a month’s notice. The company says “a limited number of ads” will play before and during shows and movies.
At launch, all Prime Video subscribers in the U.S. will start seeing ads regardless of their plan. The ads will not be skippable.
There will not be a way to keep an ad-free experience without paying extra, unlike Netflix which allows basic and standard plan subscribers to stay ad-free.
|Launch Date for Ads
|January 29, 2023
|Geographic Availability Initially
|Can ads be skipped?
|Do all plans show ads?
|Yes, to start
|Fee for ad-free viewing
The extra fee to make Prime Video ad-free will be $2 per month. Prime members in the U.S. already pay up to $14.99 monthly, so this represents a nearly 15% increase to avoid mandatory ads.
Current Subscribers Unhappy With Surprise Announcement
Many loyal Amazon Prime customers have expressed anger and disbelief at the upcoming changes. They signed up for ad-free unlimited TV viewing as one of the main benefits of a Prime membership.
Now they will lose that perk and need to pay even more to keep ads away. Many feel Amazon has broken trust and failed to communicate a material downgrade in Prime benefits.
“This angers me to no end. Just another greedy move by Amazon to milk its customers for more money.”
Comments on Amazon’s announcement are overwhelmingly negative across social media, news articles, forums, and reviews. Thousands of Prime members say they will cancel their membership or Prime Video over this.
There is also confusion around why long-time subscribers should now see mandatory ads without warning. Adding fees to remove them contradicts Amazon CEO Jassy’s statement from April that the company would “keep trying to make Prime better every year”.
Competitive Pressure Driving Shift Towards Ads
In recent years, Amazon has invested over $10 billion annually in Prime Video – more than any streaming competitor except Netflix. But with rising inflation and economic uncertainty, it has struggled to generate profit from these investments.
The launch of an ad-supported option attempts to unlock a new revenue stream and reduce costs for price-sensitive viewers. Analysts believe it could drive a 20% or higher profit margin.
Other streaming giants like Hulu, Peacock, Paramount+, and even Netflix already supplement subscriptions with ads. Their success likely prompted Amazon’s strategic shift.
However, most competitors offer ad-free plans or account for ads in far lower subscription prices. They also introduced them years ago before amassing a wide following. This helped set appropriate expectations around the degree of ad support.
By surprising established customers with ads after emphasizing freedom from them for so long, Amazon may unintentionally churn some of Prime’s most loyal fans.
Bleak Outlook for Ad Reception Among Current Subscribers
Early data indicates Prime members will not happily embrace ads on a service they have used ad-free for years. In a recent poll, over 80% said they will cancel Prime or Prime Video if they start seeing ads without an option to avoid them.
Many subscribers paid over 50% more for Prime just 8 months ago and now face new fees or ads. This compounds frustration around the bait-and-switch nature of the change.
Customers also worry ads will disrupt viewing – especially since they cannot be skipped to return to content. Research shows over 60% of U.S. streamers will cancel their subscription if they feel ads excessively interrupt the experience.
Some analysts estimate that Amazon risks losing up to 12% of Prime Video’s subscriber base in markets where it introduces unskippable ads. Many who cancel say they will turn to other streamers like Disney+ and Apple TV+ which remain wholly ad-free.
Outlook Going Forward: More Countries and Prices Increases Over Time
While launching initially in the U.S., Amazon says it plans to bring Prime Video ads to other countries over the course of 2023. No specific timeline is available yet.
Industry experts predict that after an initial wave of cancellations, Amazon will slowly increase the ad load and price of ad-free viewing on Prime Video. The goal will be maximizing revenue, even if it comes at the cost of some members downgrading or leaving Prime.
It mirrors a similar growth strategy that Amazon has pursued in e-commerce. As more competitors entered that space, Amazon aggressively cut prices and operated at razor thin margins to undercut rivals. Now with dominant market share, it has been raising seller fees and Prime subscription rates to increase profitability.
The launch of Prime Video ads in 2023 may mark the start of a multi-year drive to keep boosting monetization – potentially at the expense of some consumer satisfaction long-term.
While a company as large as Amazon can withstand some subscriber losses in the short term, it does risk tarnishing the Prime Video brand if ads remain intrusive and unavoidable. Competitors like Apple, Disney, and even Walmart now offer streaming video with subscriptions priced lower than Prime.
If enough customers feel Prime Video no longer provides good value compared to rivals, it could accelerate an erosion of Amazon’s market share over the years ahead.
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