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NewsFlashJuly 27, 2022

Amazon Prime Hikes Prices As Netflix & Microsoft Partner For Ad-Supported Tier

July 27, 2022
Ashley Lightfoot Photo
Ashley Lightfoot
Content Marketing Manager

The streaming wars are heating up as the industry’s biggest players attempt to finely balance the cost of delivering their services while contending with increased competitiveness in the category.

For Amazon Prime, which bundles its streaming platform with live sports and free express delivery options from its online store, fine-tuning this balance has resulted in a price hike across Europe, just months after increasing prices in the US.

In Germany, which is Amazon’s biggest market outside of the US, the cost of Prime membership will increase by 30%, in France by 43%, and in the UK by 20%. Conversely, consumers in the US saw their membership costs increase by just 17%.

The price hike is the first to be made by the retail giant since 2014 and is, according to a spokesperson from Amazon, a direct response to rising inflation and increased operational costs.

Like many brands, Amazon has expanded at a stupifying speed over the last few years, especially during the pandemic, when restrictions forced consumers online and stimulus measures led to a surge in demand. But with costs rising and consumer confidence at an all-time low, Amazon now finds itself vulnerably overextended.

The rocketing fuel prices that are driving up the cost of the Prime Membership’s free delivery, coupled with the huge investments in content production for Prime Video have, it appears, finally pushed the retailer to increase prices.

Indeed, the cost of Amazon’s attempts to dethrone Netflix and win the streaming wars have punched huge holes in its balance sheet. Earlier this year, the online retailer closed its purchase of MGM studios at a cost of $8.5 billion — while the first season of its new Lord of The Rings series alone is said to have cost around half a billion dollars, making it one of the most expensive TV shows in history.

Amazon’s price hike comes just months after Netflix announced its own increases, alongside the implementation of an ad-supported tier to increase revenue while keeping costs for the consumer low.

Netflix announced that this ad-supported tier would be developed with the support of a new technology partner, Microsoft.

COO of Netflix, Greg Peters, clarified in a statement that “Microsoft has the proven ability to support all our needs as we together build a new ad supported offering. More importantly, Microsoft offered the flexibility to innovate over time on both the technology and sales side, as well as strong privacy protections for our members.”

While no official release date has been confirmed yet, the ad-supported tier is rumored to drop towards the end of 2022 or the start of 2023. Netflix joins a number of rivals such as Disney+ and HBO Max who’ve also drawn up plans to implement commercials into their services.

For Netflix, however, the scheme is being watched much more closely, as the once undisputed industry leader tries to limit an exodus of consumers from its platform. The beginning of the year saw the streaming giant report a loss of 200,000 subscribers while forecasting that more than 2 million could follow in the next quarter — leading to a huge drop in the company’s share price.

In mid-July, Netflix revealed a somewhat rosier picture, with less than a million jumping ship in Q2. This, alongside the critical success of Stranger Thing’s fourth season, caused Netflix stocks to jump up by as much as 8%.

Ultimately, the streaming industry has changed a lot in the last ten years and both Netflix and Amazon now have to contend with many more players who have their own enticing offerings. Many of these new services launched in and around the years of the pandemic (and grew significantly during this period) when consumers were happy to splash out on multiple subscriptions. But a contraction of the market was always inevitable.

The brands that are now mixing up and re-balancing their offerings demonstrate how the industry is recalibrating around the changing preferences of consumers — many of whom have spent the last few years experimenting with different services and finding what’s right for them.

We can surely expect in the years to come for the Streaming Wars to continue heating up. Whether this will come exclusively at expense of the industry champion, Netflix, is still yet to be seen.


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