Amazon spends billions of dollars each year on programming for its Prime Video platform and now wants customers to pay or get used to seeing ads in their favorite shows.
On Monday, the tech giant made ad-supported streaming the default on Prime Video for its more than 200 million subscribers. The company originally announced the plan in September, saying it needed to “continue to invest in engaging content and continue to increase that investment…”
Amazon said in its original announcement that Prime Video will show fewer ads than regular TV or other streaming services, but those who want to avoid them altogether will have to pay an additional $2.99 per month on top of the $14.99 monthly fee already existing.
The change comes as the company has increased the amount it spends on content to complement its Prime offerings. In 2022, the company finalized founder Jeff Bezos’ $8.5 billion purchase of MGM, in what was its second-most expensive acquisition at the time. Since then, Amazon has ramped up spending, including a $16 billion splurge on content in 2022, of which $7 billion went to original programming.
In the third quarter of 2023, the company’s most recent earnings report, Amazon earned just over $10 billion from its subscription services unit, which includes Prime and other non-Amazon Web Services subscription services in digital video, audiobooks, digital music and email. books. Experts predict that the new changes to Prime Video could provide a further boost.
Analysts at Morgan Stanley predict that the company’s changes could bring in an additional $3.3 billion in advertising revenue in 2024. Meanwhile, New York-based media investment firm MoffettNathanson had lower forecasts but still said that Amazon will bring in $1.3 billion from advertisers in 2024 and another $2.3 billion next year.
The company expects that 159 million of its subscribers will be immediately exposed to advertisements on the platform Wall Street Journal reported citing an internal presentation Amazon made for potential advertisers. This number could be attractive to companies looking to reach more eyeballs, as it beats the 23 million monthly active users exposed to ads on the market-leading Netflix platform.
However, Prime customers are mostly unhappy with the change and have taken to social media to complain about the new ads on the platform. Many have attributed the launch of Prime’s ads to corporate greed.
Prime Video now has advertising???@amazon @PrimeVideo why are you so greedy? #deletefirst pic.twitter.com/FjtKDGwnTS
— Ray Meyer (@rmeyer1126) January 30, 2024
I’m disappointed to hear that Amazon Prime Video is introducing advertising. It’s a paid subscription service and I expect an ad-free experience. This move could push users to explore other platforms.
— mariana velaz (@maribella343) January 26, 2024
While customers are unhappy with the new change, Wall Street’s push for profitability in streaming has caused companies to adapt their previous business models. In December 2022, Disney+ introduced an ad-supported tier and at the same time announced a $3 monthly price increase for its ad-free plan. It then raised prices by another $3 a month in August.
Netflix, which with 260 million subscribers worldwide has more than double the customers of any other streaming service, has cracked down on password sharing, as well as debuting its own advertising tier, in a bid to improve profitability. That helped Netflix, which is emerging as the undisputed winner of the streaming wars, crush its latest earnings with its biggest boost of new subscribers since the pandemic. Of course, Netflix kicked off streaming’s shift from growth to profitability by reporting a decline in subscribers in 2022, contributing to the wave of hype in streaming, including now Amazon Prime.
While the percentage of U.S. households subscribing to streaming services has remained between 80% and 83% each quarter for the past two years, that number jumped to 85% by the end of 2023, exceeding expectations and fueling the hope that there is even more room to grow in the streaming sector.
Amazon did not respond to a request for comment from Fortune.