Customer Backlash – Amazon Facing Pushback Over Pricing Increases to Prime

Amazon Prime is a massive part of many people’s lives. When the service launched, it brought convenience and security to the idea of buying things online. Recent price changes have driven many users to cancel the service in protest. What’s exactly going on at Amazon, and how will this affect the company?

An Innovative Service Comes to Life

Amazon started as a bookstore in the early 2000s but quickly shifted gears to become the world’s largest online retailer. When Prime launched in 2005, Amazon was still playing second-fiddle to eBay in the online retail wars. All that would change when the service went live.

Buyers could get free two-day shipping for an upfront payment of a mere $79 (a hefty saving on the $9.48 offered to regular customers). The math worked out to if you just bought nine items over a year, you’d make back your money with the shipping you saved.

Single-Handedly Raising the Bar for Convenience

After Prime became a fixture in Amazon, the service expanded rapidly. Before long, Prime was the reason Amazon made so much money because the service kept attracting more and more customers. The company had worked out the logistical nightmare of shipping and brought it down to an art.

However, the thing that Amazon Prime was predicated on was customer service first. Over time, Amazon’s customer service has taken a nosedive, especially in areas outside the US. Even so, many Prime users stuck with it, even when the price increased to $99 in 2014.

Prime Video Brings a New Depth to Prime

While most customers got into (and stayed with) Amazon Prime because of the free shipping benefits, some of them leveraged the partner programs that Amazon put in place with other outlets. Amazon’s entertainment empire expanded to encompass gaming and even competed in the streaming market.

A few of Amazon’s Prime Video offerings, like The Boys, have garnered critical acclaim and even won awards. However, several of the company’s series have also hemorrhaged money, which might be one of the most significant reasons for the increasing costs.

Amazon Announces a Change in Costs

At the end of 2023, Amazon announced an increase in the cost of accessing its Prime service. The $139-a-year cost huddled on the edge of double the initial offering, but many consumers were willing to swallow it as part of paying for a useful service.

On January 3^rd, 2024, Amazon followed up with a statement that they would force Prime Video users to pay a further $2.99 a month to avoid ads. Previously, the streaming service would only show ads at the start of a new watch session, but now, ads would be placed within the streaming series itself.

Customers Take to Social Media in Rage

Immediately, as the company’s email went out, all hell broke loose on social media. Longtime subscribers were talking about quitting the service altogether. Many of the regular subscribers to Prime Video simply canceled their service altogether.

Amazon’s push to increase revenue comes at a time when other streaming companies are struggling to stay afloat. Whether this decision will lead to many more people leaving Prime Video to go to other platforms where ad-free viewing is available is uncertain. Many users have stated they will do just that.

Heavily Impacting Users Who Subscribe Monthly

Amazon’s previous price increase in 2022 raised the price that customers paid by a mere $20 per year. However, almost half of Prime’s subscribers aren’t paying the yearly subscription fee. Some customers who can’t afford the lump-sum payment for a yearly subscription opt for the service’s monthly payment method instead.

Amazon introduced a monthly subscription fee for Prime that was more viable for many households. Instead of a huge payment once a year, these subscribers would pay $12.99 monthly to access Prime each month. The new payment schedule introduced in 2022 sends this price up to $14.99, but the overall cost is much deeper.

The Hidden Cost of Monthly Subscription

Amazon’s previous monthly subscription service works out to around $156 per year. That’s nearly one and a half times the yearly subscription cost before the price increase in 2022. With yearly subscribers paying $139 a year before that price hike, monthly subscribers are already paying even more.

After the increase, a monthly subscription for Amazon Prime came up to $180 a year ($14.99 x 12 months). After paying all this, you’d have to pay another $2.99 monthly to remove ads from your video. In essence, for the similar experience you’d be getting 2 years ago, you’d now be paying $220 annually if you were paying monthly subscription fees.

Will This Impact Amazon’s Customer Base?

Despite consumers’ backlash, price rises haven’t significantly affected Prime’s customer base. Both monthly and annual subscribers show the same level of customer loyalty, with most people sticking with their subscriptions even if the price goes up.

The shareholders at Amazon are also convinced that most consumers will stick around. When the price increase was announced, the stock price went up, with most stockholders thinking that it was a good idea since it would allow for more revenue to be spent on other projects.

A Shaky Economy Might Mean Problems

While historically, Amazon’s customers remain loyal through price increases, this is the first time that so many of them will have to cough up extra in such a precarious economy. Since most customers see Prime Video as an add-on, many won’t bother paying extra for ad removal.

As of December 2021, Prime recorded over 172 million subscribers. However, if families have to choose between entertainment and something more essential, their Prime bill will probably be the first cut. Amazon’s executives aren’t considering the state of their consumers’ bills.

Will Amazon Run Into Problems?

The price rise was only recently announced, and Amazon’s shareholders seem confident it’ll go over well, with minimal complaints. However, the reality is that nothing is certain, especially not in entertainment or corporate boardrooms. Price increases may come to bite Amazon.

With the volume of high-quality shows from other competitors, the lack of performance in Prime’s customer service, and the wastage of money in projects no one is interested in, Amazon might be in the right place for a wakeup call. Consumers who are unhappy about things should vote with their wallets.

*This article was updated on 01/21/2024