shippingamAmazon’s net shipping costs — the difference between how much it charges customers for shipping and how much it actually spends to get their purchases in their hands — hit a new high in the fourth quarter, topping $1.2 billion.

amazon-fullThose are the underlying economics driving the company’s announcement yesterday that it’s considering raising the price of its $79/year Amazon Prime subscription service by an additional $20 to $40 — citing a combination of higher Prime usage and the increased cost of fuel and shipping. The flagship feature of Amazon Prime is free two-day shipping, and Amazon hasn’t raised the price of the service in the U.S. since its launch nine years ago.

“On a per customer basis, Prime members are ordering more items across more categories with free two-day shipping than ever before,” said Tom Szkutak, the company’s chief financial officer, on Amazon’s earnings conference call yesterday afternoon.

The number of Prime subscribers has also increased, to more than 20 million worldwide as of the end of the year.

In the past, Amazon CEO Jeff Bezos has cited the company’s addition of features to Amazon Prime — Prime Instant Videos and Kindle book lending — as an example of the value that the company is providing to customers, without raising the subscription rate. But it looks like the economic realities are finally catching up with the company.

On the conference call yesterday, Amazon executives declined to say when or how the increase would roll out. If you’re an Amazon Prime subscriber, would you stick with the service at $99/year? What about $119/year?

PreviouslyAmazon shares fall 10% after big holiday earnings miss

Comments

  • Keith Curtis

    Obama wants high gas prices so he can advance his green agenda: http://news.investors.com/ibd-editorials/021612-601510-obama-likes-high-gasoline-prices-.htm

    • Guest

      Obama’s not the only one, troll.

    • elbowman

      You’re a tool, troll!

    • balls187

      Obama also took $10,000 from me today. This wasn’t the change I voted for!

    • Guest

      Keith Curtis eats baby pandas on sundays at church

  • Dan

    If Amazon continues to increase the amount of TV shows and movies available for free via Prime, it’s a no-brainer to keep using the service

  • elbowman

    I’m in! $20/$40 more is still a great deal for the amount of product they ship to me.

  • busy

    For $20 it’s a no-brainer. I’d think a bit harder about $40, but would likely still renew. Prime saves me so much time not having to go to stores that it seems like a very reasonable trade-off.

  • wildsubnet

    Definitely $20…and if I’m being honest, probably $40 too. The two day shipping is awesome. Although, I wonder if dropped prime how much would I still get in two or three days. Seems like I get a lot of stuff in 1 day now (w/o paying for it).

  • Waffleater

    It makes sense to me. Amazon offers a legitimate Netflix competitor ($96 a year value) + the free shipping! The value proposition is insane. At $119, I would still be a great value.

  • balls187

    So…pay more for the same?
    /unsubscribe

  • SuicideNinja

    Maybe they could just limit the amount of 2day shipping uses at the current price and charge more for unlimited. I was thinking of getting prime, but I don’t order items I need that fast very often and I have Netflix and Hulu already. At a higher price I would decline.

  • Megapril

    Prime Members are also able to extend the shipping discount to up to 4 other immediate Family members. All you have to do is send them the invitation from your account and verify the email addresses… Those you invite don’t get all of the other Prime membership bonuses, but they do get the same shipping benefits as you. I don’t know why they do this, other than hopes of reigning in another full paying Prime customer, but between 2-4 people taking advantage of Prime shipping for the cost of only one membership fee I could see the plan seriously backfiring on them…

  • Out For Justice

    Seems dishonest to bundle movies and shipping. Also seems dishonest for Amazon to work with Comcast to throttle Netflix traffic and make revenue off of Netflix using its infrastructure.

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