The increase will only apply to monthly subscriptions, which will raise from $10.99 to $12.99. Members who pay the popular $99 annual Prime fee or students paying $49 won’t see a cost increase.
The online marketplace said the changes are effective immediately, though existing members have until Feb. 18 before they start paying more. Amazon claims it doesn’t have a preference whether people pay monthly or annually, but the price jump incentivizes locking into a 12-month plan.
With the new pricing scheme, the monthly option comes out to $155.88 a year, up from $131.88. Students will still pay half the full monthly fee, or $6.49 (up $1). The monthly option for members using government aid did not change.
The price hikes will likely result in customer backlash, especially since this is the first increase since Amazon established the monthly payment option. But most people will agree that, even with the new pricing, Prime offers customers an excellent value. We suspect people will move to the more economical annual fee than leave the service altogether.
Amazon has invested heavily in Prime over the last few years to lure users away from other subscription services and put a dagger in big-box retailers like Walmart as they struggle to find an online audience. Amazon’s success has been staggering. There are an estimated 90 million households using the service, an increase of 30 percent year-over-year. That’s a crucial metric for the service since Prime members spend twice as much as non-members.
Prime offers customers two-day shipping, video streaming similar to Netflix, music streaming, and many other benefits. To improve its customer retention rate, the online marketplace has turned to original and exclusive content. It also added a slew of new services, including Prime Pantry, free eBooks, Whole Foods benefits, and the controversial “Amazon Key.”
A spokesperson for the company said the price increase was due to Prime member’s “tremendous appetite” for new features. In 2014, Amazon increased the price of its annual subscription from $80 to $100, so this monthly price hike comes as no surprise.
Update 10:20am CT, April 27: Amazon will raise the price of its annual Prime membership for U.S. users on May 11 by $20. New customers will pay $120 for a membership while the student rate will jump to $60 annually.
Amazon CFO Brian Olsavsky cited new features and increasing costs as the main reasons for the price hike. This marks the first time Amazon has raised the annual subscription fee since 2014 when the price raised from $80 to $100.
The upcoming changes won’t affect customers who pay monthly subscription fees. They will continue to pay the recently increased price of $13.