For as long as Amazon has offered its Prime subscription service, it has operated primarily on an annual contract: For $99, an Amazon Prime customer gets one full year of free two-day shipping and access to Amazon’s library of original and licensed television and films.
But now the e-commerce titan is disrupting its own model. In a partnership with Sprint, Amazon will offer Prime for $10.99 a month, which adds up to $132 annually. In lieu of being tied down to a full year of Prime, customers can pay a slight premium to join for a month at a time, whether it’s to binge-watch a new show or eke out savings on costly shipments.
It’s an experiment that Amazon hopes will expose its subscription service to new eyes. “It’s a new channel they’ve never been in,” said Tom Caporaso, CEO of Clarus Commerce, e-commerce provider that owns FreeShipping.com. “Amazon is touching consumers that they may not have had access to in the past.”
Prime is already a widely used service. Nearly 41 million households, or 40 percent of the U.S. market, hold a Prime membership, according to a survey conducted by the investment bank Cowen. Though Amazon keeps its Prime numbers closely guarded, the Seattle company announced just before Christmas it had added 3 million new subscribers in just one week in December.
The Sprint deal represents a new push toward mobile. “The monthly price point plays well into monthly telephone bills,” said Caporaso. “Hitting you with a $99 charge on your telephone bill might not work for most consumers.”
Sprint, the fourth-largest U.S. cellular carrier, gives Amazon a chance to test that proposition. “We know customers love shopping on their mobile devices and having access to entertainment at their fingertips while on the go or at home,” Jeff Blackburn, senior vice president-Amazon Business Development, said in a statement. “We’re excited to team up with Sprint to introduce this special Prime offer.”
The initiative comes as a new crop of competitors has challenged Amazon’s online retail dominance. On the same day Sprint and Amazon announced their partnership, shipping startup Postmates unveiled a $10 monthly subscription service that provides free shipping to buyers and sellers on orders of at least $30.
Compared to Postmates’ offer and streaming content competitors — most of which offer month-to-month subscriptions — the 12-month minimum Prime membership has appeared a lengthy commitment. But once locked into the yearlong deal, Prime users generally become reliable Amazon customers, spending three times more money annually on the site than non-Prime customers.
Only once before has Prime been available on a monthly basis. In a two-week trial in 2012 — seen as a direct challenge to streaming sites — customers could sign up for Prime at $7.99 a month.
But Amazon’s business profile has morphed since then, moving more deliberately into media content creation, like the new TV series “The Man In The High Castle,” an Amazon exclusive. The company has even taken steps into the fashion world, airing a new fashion show and even launching its own clothing lines. With a widely expanded raft of services, Amazon Prime is no longer about just free shipping.
“Content has gone a long way in the last 12 months,” said Caporaso. “Amazon is now acquiring more customers through digital channels who were interested in the entertainment.”
Moving forward, Amazon is hoping more loosely attached customers — for instance, those paying monthly for content streamed on their cell phones — will make the Prime model just as profitable as it has been for those in it for the long haul.