Amazon Prime Video Is Launching Ad Supported Tier Later This Month

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Last September, AmazonAmazon” data-type=”stock”>
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Amazon” data-type=”stock”>
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announced its plan to launch an ad supported tier on Prime Video. In late December, Amazon announced the U.S. launch date will be January 29. Globally, Prime Video’s ad supported tier will begin in the U.K. and Germany the following week. An ad supported tier will become available in France, Italy, Spain, Mexico, and Australia later this year.

This makes Amazon the last prominent SVOD provider to launch an ad supported tier. In late 2022, both Netflix
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and Disney+ made available an ad supported tier at a lower monthly subscriber cost. In addition, Max, Peacock, Hulu, ESPN+ among others are all selling ads on their streaming platforms.

Adweek reports advertisers will pay a CPM (the cost to reach 1,000 viewers) of between $30 to $35 to advertise on Prime Video is at the lower end of the ad marketplace. (The ad rate is comparable to the CPM Amazon charges for their Thursday Night Football.) When Disney+ and Netflix launched their ad supported tiers, they had been seeking a hefty CPM in the range of $50 to $60, after receiving pushback from Madison Avenue, both reduced their asking price. Amazon also announced that its Freevee will continue as an ad supported service.

At present, all Amazon Prime subscribers get access to Prime Video. Amazon Prime costs $14.99 monthly or $139 annually. For non-Amazon Prime members, the monthly cost to Prime Video is $8.99. For the subscribers opting to maintain an ad free Prime Video they will pay an incremental increase of $3 each month. Hence, Amazon Prime users will be paying $17.99 each month and Prime Video users will pay up to $11.99 each month to avoid ads. For the ad supported service Amazon announced no price increase this year.

With a roster of popular programs such as, Reacher, The Lord of the Rings: The Rings of Power and The Boys among many others. The launch of an ad supported tier, is expected Amazon will become a prominent player in the streaming marketplace. Prime Video sales executives are in attendance at this year’s Consumer Electronic Show (CES), an annual event with numerous advertising executives in attendance. With more advertising inventory to sell, Amazon is also expected to have a more visible role in next Spring’s NewFronts.

Kanter estimates in the U.S. market, Amazon Prime has 150 million subscribers with 68% of them subscribing to Prime Video. Jay Marine, vice president of Prime Video and global head of sports, said, in the U.S., Prime Video ads are estimated to reach 115 million viewers each month. According to Nielsen’s monthly Gauge Report, in November 2023, Prime Video (benefiting in part from the NFL), had a 3.4% audience share, among all streaming providers, only YouTube (9.0%) and Netflix (7.4%) had a higher percentage.

Bank of America
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recently forecast the Prime Video ad tier could make nearly $5 billion in additional revenue. The ecommerce giant would add $3 billion in ad dollars with an additional $1.8 billion coming from subscribers paying the premium rate to avoid any ads. The projections are based upon 70% of Amazon Prime users opting for the ad supported tier.

Previously, UBS had forecast Amazon’s ad supported tier would garner $3 billion in ad revenue. UBS had based their forecast on Amazon selling three minutes of ads each hour. By comparison, the hourly ad load on Netflix and Disney+ is four minutes. On linear television, the number of ads is significantly higher. In its announcement Amazon said its ad load will be respectively fewer compared to rival ad supported streamers and linear TV. Amazon notes the revenue from selling ads will enable them to continue their investment in premium content.

In third quarter 2023, Amazon generated $12.06 billion ad revenue accounting for 8.5 % of total dollars and a year-over-year increase of 26%, exceeding Wall Street’s expectations. Emarketer projects ad spending for CTV in the U.S. to reach $29.3 billion in 2024, a year-over-year increase of 17%.

With Prime Video planning an ad supported Prime Video tier they have recently implemented another round of layoffs. Twitch, whose live streaming video is used primarily for video games, will lay off 500 workers, accounting for 35% of its total workforce. Twitch CEO Dan Clancy said it is an effort to “right-size our company,” citing the number of employees does not match up with the size of its business.

In addition, Amazon also gave pink slips to hundreds of employees at Prime Video and their MGM Studios. In a message to employees, Mike Hopkins, SVP of Prime Video and Amazon MGM Studios, said Amazon would be boosting investment in areas with the most impact, while stepping back from others. In 2023 Amazon had laid off 8% of their employees accounting for 27,000 workers.