Amazon is gearing up to introduce advertisements on its popular Prime Video streaming platform, with analysts projecting a substantial boost in revenue for the e-commerce behemoth. According to UBS US internet analyst Lloyd Walmsley, the move could conservatively add a staggering $3 billion to Amazon’s revenue, assuming they incorporate just three minutes of ads per hour, aligning with prevailing advertising industry standards.
However, Walmsley posited that by doubling the ad duration to six minutes per hour, Amazon could potentially see its revenue skyrocket to an impressive $6 billion. Amazon’s approach to advertising on Prime Video, though promising, aims to maintain a balance, promising “meaningfully fewer” ads compared to traditional linear TV providers and other streaming services. For those who prefer an uninterrupted viewing experience, Amazon will continue to offer an ad-free plan at a nominal fee of $2.99.
Wedbush analyst Scott Devitt, on the other hand, envisions a more expansive revenue horizon for Amazon, estimating a global ad rollout could yield an incremental revenue range of $6.6 to $8.0 billion. Devitt also highlighted that the ad-free offering entails a price adjustment for Amazon Prime subscriptions in the United States, signaling a significant change for loyal members. The monthly Prime subscription fee in the U.S. is set to increase by approximately 20%, from $14.99 to a new rate that reflects the evolving value of the service. Additionally, the annual fee will undergo a 26% hike, rising from $139 to a new price point.
Walmsley underlined the potential for Amazon to enjoy exceptionally high incremental margins from this venture, largely due to the considerable investment in content that the company has already made. The move to introduce ads on Prime Video is undoubtedly strategic, as it capitalizes on the platform’s expansive viewership and content library. In a surprising turn of events, Amazon’s stock has already surged by an impressive 50% in the year 2023, indicating strong investor confidence in the company’s direction and potential revenue growth.
This decision to monetize Prime Video directly through advertisements represents a shift in the overall strategy of Amazon, moving away from solely relying on subscription revenue to bolster its bottom line. The forthcoming addition of advertisements to Prime Video is slated for an early 2024 rollout, with Amazon aiming to tap into the immense potential of its vast customer base. By introducing ads to their streaming platform, Amazon not only aims to enhance its financial performance but also to incentivize more customers to embrace the Prime membership, which offers an array of benefits beyond streaming content.
In conclusion, Amazon’s foray into the world of streaming advertising is poised to have a substantial impact on the company’s revenue streams, potentially generating billions of dollars in additional income compared to traditional linear TV. With analysts forecasting significant financial gains and the company’s stock on an upward trajectory, Amazon’s strategic pivot toward advertising on Prime Video appears to be a shrewd move that will likely reshape the dynamics of the streaming industry and further solidify Amazon’s dominant position in the e-commerce and entertainment sectors.
Source: Yahoo Finance
