Friday TechMunch: Prime Time for Amazon

Amazon has been busy recently.

Since December there has been the drone delivery plan; the Double Helix acquisition; the leak of a potential new gaming console/set-top box (or maybe it’s a Chromecast-like dongle for video and game streaming?); rumours of an on-demand music-streaming service for Prime customers; more rumours of an Amazon smartphone; a stated revamp of the US delivery network; rebrand of LoveFilm; and finally, a hotly contested Amazon Prime price hike.

Much of this is still whispers, leaked images and hearsay but regardless, it seems as though Amazon hasn’t spent more than a day out of the news this far in 2014. Whether or not all or any of the device rumours actually end up confirmed, the changes to Amazon Prime and the purchase of Double Helix alone suggest that Amazon has some interesting plans in the works.

As of February 26^th, the cost of Amazon Prime was increased for the first time since its launch in 2005. The price hike in the UK coincided with the rebranding of Amazon’s film and TV show streaming service, LoveFilm (now dubbed Amazon Prime Instant Video) which is automatically included in the new service package, whether you want it or not. There seems to have been relatively little fuss in the UK media over this increase but US media have reported plenty of disgruntled customers since the service costs were upped across the pond, on March 14^th.

For Amazon, the move clearly makes sense. If it were to dramatically raise prices on its merchandise the world would be up in arms – no one wants to start paying £8.99 for an ebook and the Kindle has to compete with a variety of other tablets and ereaders. Instead, Amazon could raise the price of Prime, beloved of many customers, and instantly add millions to their bottom line.

There were lots of reports of customers prepared to leave Prime in droves over the $20 price hike (the US price for Prime has jumped from $79 to $99) and indeed, some of those who pay for it but don’t rely on it regularly may cancel. But considering Wedbush has estimated that at $79, Amazon was barely breaking even on shipping costs for users who ordered 20 packages per year, I doubt Amazon will care much to see those customers go.

On the other hand, Amazon would hate to lose its heavy Prime users. But there’s no real danger of this. After all, there’s no other service that offers Amazon’s wide range of products and rapid delivery to your front door, for less, anywhere in the US or the UK, and certainly none that also chucks in a video-streaming library (and possibly a music-streaming service in the future).

The company has never announced the numbers of Amazon Prime users, and it’s unlikely to do so now, but the chances are that most will stick with it. If we can’t be bothered to cancel gym memberships that cost us hundreds of pounds a year (guilty), then it’s doubtful that Amazon Prime will suddenly see a massive drop in numbers. Of course, it remains to be seen whether or not it will continue to attract quite as many new customers…

Next week we’ll take a look at the Amazon purchase of gaming studio, Double Helix.