Amazon’s decision to increase the price of its Prime membership doesn’t seem to be hurting the company.
In the company’s earnings report posted today, Amazon CEO Jeff Bezos noted that Prime memberships grew by 53 percent worldwide in 2014.
Amazon raised the cost of a Prime membership, which gives free two-day shipping and other benefits like free video and music streaming and free book rentals on Kindle, by $20 in March 2014. It was a controversial decision at the time, which has many investors and analysts concerned that Amazon may have lost customers for its subscription service.
“When we raised the price of Prime membership last year, we were confident that customers would continue to find it the best bargain in the history of shopping,” Amazon CEO Jeff Bezos said in a press release. “The data is in and customers agree — on a base of tens of millions, worldwide paid membership grew 53% last year — 50% in the U.S. and even a bit faster outside the U.S.”
Bezos called Prime a “one-of-a-kind, all-you-can-eat, physical-digital hybrid” and noted that in 2014 Amazon paid “billions of dollars for Prime shipping and invested $1.3 billion in Prime Instant Video.”
“We’ll continue to work hard for our Prime members,” he noted.
On a conference call with reporters, Amazon CFO Tom Szkutak said customers who sign up for free Prime trials to access video content end up converting to full Prime memberships at a higher rate than others, and then buy physical goods at a similar rate as other Prime members do.
“It’s a combination that is great for us,” Szkutak said.
Szkutak declined to disclose the number of Prime members, or say how much they buy on average, but reiterated past statements by Bezos that Amazon has “tens of millions” of members.
Analysts have pegged that number to be between 40 and 50 million. Research conducted by Consumer Intelligence Research Partners (CIRP) found that Prime members spend $1,500 a year on average, compared to non-members who spend about $625 a year.
The company is holding a conference call this afternoon, and we’ll update this post with any new information.
Amazon today posted revenue of $29.3 billion and $214 million in profit for the 2014 holiday quarter. While Amazon missed Wall Street’s expectations of $29.7 billion in revenue, it crushed earnings predictions with a $0.45 EPS — analysts expected $0.17 per share.