When Amazon introduced a monthly subscription plan for its Prime program as an alternative to the $99 annual fee earlier this year, the retail giant bet that the new option would open Prime up to more potential subscribers. So far, it seems to have worked.
Six months after the program was announced, a new study from Consumer Intelligence Research Partners estimates that 19 percent of Amazon’s 65 million Prime members — which translates to 12.3 million subscribers — have opted for the monthly charge over the annual fee. The study estimates that Prime members make up 52 percent of Amazon’s customer base and spend twice as much as non-Prime Amazon shoppers, approximately $1,200 annually versus $600.
Monthly subscribers pay $10.99 for Prime’s full offering of benefits, such as free two-day shipping, music and video streaming, cloud storage, same-day/two-hour delivery in some cities, and more. Another option, this one for $8.99 a month, is a standalone subscription to Amazon’s video streaming service. For those keeping score, that cost is one dollar less than Netflix’s standard offering.
“We predict the monthly payment option will improve Amazon Prime’s already very high retention rate, by eliminating the $99 annual decision point,” Mike Levin, partner and co-founder of CIRP said in a statement. “Of course, for a single membership the monthly payment option also increases Amazon’s fee revenues by about one-third relative to the single annual payment, so monthly payments also boosts Amazon’s revenues.”
On the eve of Amazon’s second Prime Day in June, CIRP reported the company had reached 63 million U.S. Prime members, surpassing half of its U.S. customer base for the first time. CIRP estimates that Prime membership increased 38 percent over a year ago, when Amazon had approximately 47 million subscribers, though it hasn’t seen a big quarterly jump.
“U.S. Amazon Prime membership continues to grow, although at a slower pace than before,” said Josh Lowitz, partner and co-founder of CIRP. “As Amazon starts to reach a limit of available U.S. households, it saw its annual growth rate decline a bit.”
That’s where the monthly charge comes in. Though not as flashy as some of Prime’s benefits, it adds a little bit more accessibility to the service while making more money for the company.
Amazon CEO Jeff Bezos said earlier this year the company’s goal is to make Prime benefits so numerous and valuable that it’s irresponsible not to be a member. Amazon has been backing up that claim over the last few weeks by adding several big benefits.
The newest perk, Prime Reading, lets Amazon Prime members access more than 1,000 e-books from best-selling authors at no extra charge, read a rotating selection of popular magazines, and read content from the company’s Kindle Singles library, including classic short stories and essays.
On Sept. 13, the company made its Audible Channels audio subscription service available as part of Amazon Prime, and last month the company also added game benefits with a new set of “Twitch Prime” perks.