Amazon is set to join the ranks of tech giants venturing into the world of advertising on its streaming services in countries like the US and UK, with the aim of bolstering revenue for further investments in content.
This move will serve as a litmus test for Amazon Prime members, who already pay a monthly subscription, to gauge their willingness to tolerate the inclusion of advertising during their program viewing experience.
In a blog post released on Friday, Amazon disclosed that starting early next year, Prime Video content will incorporate a “limited” amount of advertisements. This strategic move is geared towards enabling continued investment in TV content and ensuring sustained long-term growth.
Amazon has assured that the volume of ads will be “meaningfully fewer” than what’s typically seen on traditional linear TV and other streaming TV platforms. Additionally, US customers will have the option to pay an extra $2.99 per month for an ad-free viewing experience, while pricing details for other regions are yet to be revealed.
The introduction of advertising within Prime Video content is slated for early 2024 in the US, UK, Germany, and Canada, with France, Italy, Spain, Mexico, and Australia following suit later in the year.
Major US streaming services have faced pressure from investors to rein in the extensive spending on TV and film content, which was previously viewed as a necessity in the pursuit of subscriber growth. Amazon’s Lord of the Rings spin-off, “The Rings of Power,” has been reported to be one of the costliest TV shows ever produced, measured on a cost-per-episode basis.
However, streaming services have encountered a slowdown in subscriber growth in critical markets due to economic challenges and intensified competition from numerous rivals. Consequently, streaming providers like Netflix, Disney, Paramount, and Warner Bros Discovery have been raising prices to offset losses and boost profitability.
Amazon announced that it would not be raising the cost of its Prime subscriptions in 2024.
Many streaming platforms, including Netflix, have introduced advertising on lower-priced subscription tiers in the past year to create additional revenue streams and offer more budget-friendly entry-level options for households.
Bob Iger, Disney’s CEO, disclosed that its ad-supported service, priced at $7.99 per month, had gained 3.3 million subscribers by the summer. Industry experts anticipate that Apple will also introduce layers of advertising within its services.
Netflix’s ad-supported offering initially started slowly, as reported by analysts after its launch in the previous year. However, ad industry executives indicate that the platform now generates more revenue per user through its advertising plans compared to the standard tier.
In May, Netflix revealed that its ad-supported plan had nearly 5 million monthly active users worldwide after six months. Still, Spencer Neumann, Netflix’s Chief Financial Officer, mentioned in July that ad revenues were experiencing gradual growth and were not expected to be a substantial contributor for that year.