Amazon this week began serving advertising to Prime Video customers who did not elect to pay an additional $2.99 per month in addition to the basic annual Prime membership of $139 per year or $14.99 per month. Adding commercials is estimated to potentially bring in more than $3 billion a year for Amazon, which is expected to have 2023 revenue of around $567 billion. The surplus will come in handy to pay out $1 billion a year over 11 years for the rights to NFL’s “Thursday Night Football.” The ad-supported Prime Video service launches in the U.S., Canada, UK and Germany, with Mexico, France, Italy, Spain and Australia following later in the year.

“Prime Video subscriptions will now automatically default to the ad-supported tier at current monthly rates of $14.99 for Prime delivery members and $8.99 for non-Prime members, or those who only subscribe to the standalone video service,” explains Yahoo Finance. “Subscribers who want the ad-free version will now see their monthly bill go up by $3 a month.”

Variety predicts the new configuration “will hit the ground running in a massive way,” citing a Morgan Stanley forecast that “Prime Video ads will generate $3.3 billion in revenue in 2024 worldwide, growing to $5.2 billion in ’25 and $7.1 billion in ’26,” translating this year to “nearly $2.3 billion in annual earnings before interest, taxes and other write-downs.”

Another analyst estimate in Variety, from MoffettNathanson, is more conservative, “but still believes Amazon’s move will be seismic.” The firm’s analysts peg revenue at an additional $1.3 billion this year, rising to $2.3 billion next year, for Prime with ads. “But that’s not all: The ecommerce company stands to pull in an incremental $500 million per year in ’24 and ’25 from Prime members who want to avoid seeing ads, per the analysts’ models,” according to Variety.

“Most major streaming apps have embraced ads as another way to make money,” writes The Washington Post, noting that “Apple TV is one of the few streaming services that does not offer third-party ads, yet.”

Amazon has approximately 96 million U.S. Prime subscribers, and more than 200 million globally, “but only a subset of that actively engages with Prime Video,” per Yahoo. Students can become Prime members for $69 per year, and those receiving government assistance are offered a rate of $6.99 per month.

Amazon announced the change in a September update about Prime.

Related:
Amazon’s Video Ad Push Aims to Turn TVs Into Shopping Carts, Bloomberg, 1/29/24