Amazon Prime Video becomes next streaming service to introduce ads

Prime Video subscribers will have to sit through ads if they don't want to pay more for their membership.

Prime Video subscribers will have to sit through ads if they don't want to pay more for their membership. Photo: Getty

Amazon Prime Video will ring in the new year by joining other streaming services in introducing ads to its platform.

In an email to subscribers, Amazon announced ads would interrupt its movies and series from January 29 for accounts in the US, UK, Germany and Canada.

Ads will be introduced to subscribers in Australia, France, Italy, Spain and Mexico later in the year.

The change will affect Prime Video accounts automatically, with membership prices to stay the same.

However, if subscribers wish to stream to their heart’s content uninterrupted, they will have to pay extra.

Although the Australian dollar figure hasn’t been announced, American subscribers will shell out $US2.99 ($4.38) more than the basic subscription cost per month to have an ad-free plan.

Amazon told subscribers that it aims to have “meaningfully fewer” ads than linear TV and other subscription streaming services, and that the income from the ads would allow the company to increase investment in content.

This comes after Amazon increased the cost of Prime Video memberships earlier this year, from $6.99 per month to $9.99 per month.

The company has not been afraid to invest big bucks in its streaming content, having spent $US16.6 billion ($24.2 billion) in 2022 across TV, film and music content; Prime Video’s The Lord of the Rings: The Rings of Power series alone cost an estimated $US450 million ($658 million).

Amazon’s 2023 financial results are not yet public, but it enjoyed a revenue in Australia of $2.6 billion in 2022, with subscription services accounting for $246 million.

However, the company still posted a loss in Australia of $32.7 million.

Revenue from ads on Prime Video could ease losses significantly going forward; Business Insider previously reported that Amazon expects Prime Video’s ads to reach more than 115 million people per month in the US alone.

Ads infiltrate streaming sector

Amazon Prime Video’s move towards ads is the latest in a sector-wide trend, with fellow streaming video on demand (SVOD) platforms such as Netflix and Disney+ having already introduced ad-supported tiers.

Ads on streaming services have sparked complaints from subscribers, but many have been forced to compromise amid growing cost-of-living pressures.

Netflix led the charge towards ads last year; since then, the number of subscribers to its ads tier increased 100 per cent between the first and second quarter of 2023, and a further 70 per cent between the second quarter and third.

The number of subscribers to Netflix’s ads tier will likely grow further as the company phased out its cheapest ad-free plan in Australia and other countries this year.

But subscribers on tightening budgets are starting to get more selective when it comes to their streaming habits.

Subscribers tightening belts

In June, Telsyte data found the total number of subscribers to subscription services in Australia increased by 3 per cent to 49.9 million in June, with the average number of SVOD subscriptions per household rising to 3.4.

The growth in subscription services was lower than the double-digit increase observed in the previous year, and almost half of subscribers claim they are more likely to switch between different services to save money than previously.

Increased competition in the streaming space may have made it inevitable that platforms would introduce different subscription models to stay competitive.

But Victoria University senior lecturer in screen media Dr Marc C-Scott previously told TND that cost-of-living pressures mean Australian households could be cutting back on luxuries such as streaming.

“Entertainment is not necessarily a critical part of everyone’s daily lives; food, all those essential things, are,” he said.

“So the first thing that’s probably going to go is … what you have to spend on entertainment, and subscription is part of that.”

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