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Prime Time: Amazon Gives Newcomers A Week To Jump In Before The Price Increase

Mar 13 2014, 7:51am CDT | by

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Prime Time: Amazon Gives Newcomers A Week To Jump In Before The Price Increase
 
 

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Prime Time: Amazon Gives Newcomers A Week To Jump In Before The Price Increase

Amazon Prime, the 2-day shipping, video streaming, e-book lending service, is about to get more expensive. The e-tail giant’s catch-all offering will cost $99 annually, up from $79, starting a week from today. The change, which Amazon telegraphed during its most-recent earnings announcement, can be seen on the home page right now. Amazon Student will see an increase to $49 annually from $39, though you can get 6 months free of the shipping benefit when you first sign up if you’re willing to forgo video streaming during that time. The bump represents the first time since the service launched in 2005 that Amazon has raised the price for Prime.

For customers who primarily use Amazon’s video service, Prime is now very slightly more expensive than Netflix, which runs just under $96 per year. But its likely few of the “tens of millions” Amazon claims use Prime are signed up just for the video. In keeping the service at under $100, the question now is whether many will cancel. To mollify them, Amazon is rumored to be getting ready to roll out a music streaming service, along the lines of Apples iTunes Radio as well as a set-top box akin to the Roku or AppleTV.

In the meantime, though, customers can expect to pay more for Prime as their service comes up for renewal. Amazon sent out e-mail to Prime customers with the date when your subscription lapses. (Lucky me, mine just renewed so I won’t get hit by the price increase until February 2015!)

Whether this ends up being a winner for Amazon or not remains to be seen. The company continues to offer free shipping on any order over $35 and has decreased shipping times on standard orders by opening new distribution centers in the past year. Some may choose to cancel Prime and see what life is like without it. If that happens, Amazon may live to regret its decision.

As I wrote last month, Prime becomes a habit, leading to much higher spending with Amazon. The company is basically concluding that it will collect $20 extra from everyone and lose virtually no Amazon orders from anyone. If even a few percent of customers drop Prime and place even slightly fewer orders through the year, Amazon might end up losing out on enough gross margin to negate whatever benefit the extra $20 per remaining Prime customer brings. Of course, we might never know how this plays out. The company is often vague on earnings calls about specifics; it’s unlikely to be especially forthcoming about this change.

In the meantime if you were considering Prime at all; you should sign up for a trial now. It’s free to start and you’ll get the first year at the old price if you decide you want to keep it.

Follow me on Twitter and on Facebook. Find the rest of my Forbes posts here.

Source: Forbes

 

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