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Amazon raises price of Prime membership

3:09 PM, Mar 13, 2014   |    comments
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(USA TODAY) -- Your Amazon Prime membership is going to get more expensive.

The online retail giant revelaed it is raising the price of an annual subscription to Prime from $79 to $99. The price for the student version of Prime will also rise to $49.

The price increase takes effect March 20 for new subscriptions. Starting April 17, existing Prime members who renew their subscription will pay the $99 price.

New customers that start a free-trial between now and March 20 will lock in the $79 rate for the first year, said Amazon's Julie Law.

Amazon Prime is a very popular annual subscription service that offers free two-day shipping on select items. It also allows access to more than 40,000 movies and TV episodes through the streaming service Amazon Instant Video. Subscribers also have access to more than 500,000 books that can be borrowed through the Kindle Owners' Lending Library.

Amazon does not release Prime subscriptions rates. However Morningstar analyst R.J. Hottovy estimates there are about 15 million Amazon Prime members in the United State and another 5 million overseas.

The service offers a "compelling consumer value" and he doesn't think the increased prices will lose Amazon many customers.

"Amazon has established itself as a vital shopping destination for Prime members, who make the majority of their online purchases on Amazon and spend nearly two to three times as much as non-Prime customers," Hottovy said.

Shares of Amazon are up more than 2% in early trading following news of the price increase, first reported by Cnet.

Amazon first hinted at a price increase for Prime in January during its fourth-quarter earnings call, when the company also revealed its shipping costs surged 19% to $1.21 billion.

It is the first price increase in nine years, said Amazon's Julie Law.

"Even as fuel and transportation costs have increased, the price of Prime has remained the same. If you consider things like inflation and fuel costs, a Prime membership valued at $79 in 2005 would be worth more than $100 today," she said.

"They're getting caught in the cost of getting it to you in 48 hours," says Gartner analyst Gene Alvarez.

Last month, a survey from Bizrate Insights conducted after Amazon's quarterly call found many Prime users would consider canceling their subscription if the price was raised.

Thursday, Twitter users said they'd hang on to their Prime memberships.

One posted Thursday morning, "$99/yr for streaming movies/TV shows, Kindle Borrowing Library, & free 2-Day shipping is still a monster deal. I'm keeping it."

Another wrote, "Not too happy with paying more but Amazon's customer service ROCKS and that makes me happy customer."

Alvarez says Amazon has a "large volume" of users who maximize their subscriptions by shipping lots of items and using Amazon Instant Video, but this price hike could hurt the company among members who use Prime occasionally.

"We're going to see a bargain re-evaluation of the Prime relationship," he says.

Members of the Amazon's Prime Fresh grocery delivery service will continue paying $299 a year.

Brett Molina - USA Today

 

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