​Ad-supported Prime set to net Amazon US$2bn+

Analyst Omdia forecasts Amazon’s ad-supported Prime Video will generate more than US$2bn (£1.6bn) in incremental ad revenue in 2024, its launch year.

The revenue is in addition to that generated by the sale of advertising slots during live sports broadcasts on the service.

Amazon Prime has a subscriber base of 200+ million users, who receive free shipping, music, and cloud services.

Amazon will place all current users into the ad-supported tier of its service, giving subscribers the option to pay extra to view without advertising.

Prime Video costs £8.99 per month or £95 per year, and it will now cost an extra £2.99 a month to go ad-free on the service.

Matthew Bailey, Omdia Principal Analyst said: “The forecasted global revenue of over $2bn for Amazon’s ad-supported Prime Video tier in 2024 indicates considerable growth potential for the streaming platform and reflects Amazon’s efforts to diversify its revenue streams beyond subscription fees.

“A significant factor contributing to Amazon’s success will be their capability to provide closed-loop attribution and the inherent advantage of having all their users ad-addressable by default. Amazon has already experimented with directly shoppable ad formats, and this would enhance their ability to monetise their platform even more.”

Further analysis of Amazon’s move to ad-supported streaming for Amazon Prime comes from Phil Duffield, UK VP, at global ad tech company The Trade Desk.

He takes the view that subscribers will be ok about the move, so long as the number of ads is relatively low. Duffield said: “With economic pressures and increased competition for streaming subscriber growth, nearly every premium video content company has adjusted pricing and embraced advertising. Relying solely on high-priced subscriptions will not provide the incremental subscribers needed to sustain growth. Our research indicates that 63 percent of Brits are open to ads in exchange for free streaming content [but] this model is only sustainable if the ad load is significantly lower than traditional linear television. Keeping pace with the new rules of consumer engagement requires relevant advertising, innovative approaches to identity, unleashing the power of data, and, of course, the right technology infrastructure to transact and measure. Those who embrace digital innovations will reap the greatest rewards in this new golden age of TV.”

Stefan Lederer, CEO and co-founder of Bitmovin, also points to the personalisation of ads as being a key factor in their success here. He said: “In a familiar tale, another streaming giant introduces advertisements into its service. This comes as no surprise, as its competitors have seen improved profitability since advertising came into play. Introducing adverts to the service marks an intent from the company to make its streaming service profitable.

“While Netflix introduced ads to its service a couple of years ago, its ad experience has been lacking in personalisation and targeting for advertisers. Therefore, there’s a real opportunity for Amazon to make significant advancements. If ads can help Amazon Deliver consistent, top-tier content whilst ensuring their advertising infrastructure is personalised and seamless, then the company will be in a good position to deliver value to viewers and advertisers.”

Meanwhile, ParcelHero believes bringing in ads and charging more to remove them is a low-risk strategy for Amazon Prime Video, with subscribers unlikely to ditch their Prime subscriptions in response to the move.

ParcelHero head of consumer research, David Jinks, said: “Now Prime Video carries adverts, that makes Netflix and Disney+ equivalent with-ads channels £4 a month cheaper. But this calculation doesn’t take into account all the other perks of Prime membership and, particularly, next-day delivery at no extra charge.

“If shoppers unsubscribe from Prime, they will end up paying Amazon’s fee of £4.99 so it only takes 19 orders and Prime membership has paid for itself.”