A week from today, Amazon Prime membership will be increased from $79 per year to $99 annually. All you Amazon Prime users, if you need a second to vent a little bit, go ahead…
Why The Price Hike?
There had been rumors since the beginning of this year that Amazon was planning to increase membership fees by anywhere from $20 to $40. Amazon has stated that the price increase for Amazon Prime is due to the rising costs of transportation and fuel for all those two day shipping orders. After a lackluster holiday season last year, Amazon 4th quarter profits were disappointingly lower than the expectations Wall Street had for the company. After the 4th quarter earnings reports were released on January 30th of this year, Amazon’s stock plummeted by as much as 10% the day after. Amazon’s stock price on Jan 30th stood at $403.01, the next day it dropped down to $358.69. The companies’ stock still has yet to fully recover from the severe drop in pricing. The increase in pricing for Amazon Prime may be to reassure investors who may be concerned with the companies future earnings and outlook. . Either way, the price is going up in week whether you like it or not.
If you truly don’t want to pay the extra $20, it’s still not to late to renew your membership and pay the original $79. But you should hurry cause you only have a week left. Amazon is also still allowing first time Prime users to get a free trial week with Prime and will let you purchase Prime at the original price. So if you really reeeaaally can’t stand putting an extra $20 towards the services that Amazon Prime provides, you can dodge that price increase for another year. But seriously, you have a week, so get on it.
Streaming Music From Amazon?
Perhaps in an attempt to placate their members, Amazon will be releasing a new feature for Prime users that could convince those users to stick with their Prime accounts. Amazon had been reportedly working with major record labels in the music industry since last year to set up a streaming music service similar to Spotify or Pandora for Prime accounts.
While Amazon has been relatively low key in publicizing the service and when it will actually be released, there have been reports that give an idea of how the streaming music service will work. Amazon’s music streaming will play tracks based on the user’s preferences, similar to how Pandora or iTunes Radio works. Amazon will also reportedly limit the how many times you can listen to a track or album before the site will direct you to purchase said song or album. Overall it’s not a bad idea by Amazon, but personally, if I’m going to pay an extra $20 for Amazon Prime, I would like to be able to listen to whatever songs I want without being forced to purchase the music.
Is It Worth the Risk?
Will this price increase benefit Amazon in the long run? During it’s nine year existence, Amazon Prime was meant to draw in customers and get them to use Amazon for a variety of various purchases. By offering free two day shipping, Amazon getst users to substitute purchasing good at a store by making it much more convenient and sometimes cheaper to purchase whatever items they wanted from their site. R.J. Hottovy is an analyst from the independent investment research site Morningstar who has covering Amazon for some time now. According to his report from last year, the amount of business and types of customers that the Amazon Prime system brought in was well worth the high shipping costs it incurred. Hottovy also estimates that Amazon Prime membership doubled last year and the membership base was somewhere around 20 million users.
While it seems that the Prime Membership program has been successful, Amazon must do something to rebound their stock prices and bring in a profit. Investors are demanding to see higher earnings to justify the high valuation of their stock. Hottovy has pointed out that a one time price hike for Prime would be received by the Amazon customer base more favorably than a general increase in prices on all goods. The price increase could potentially bring in hundreds of millions of dollars in additional revenue. It remains to be seen whether this price increase will have a negative effect on Amazon as a whole. After all, the volume of Prime membership signups was so high that the company actually had to limit signups at peak periods last December. Either way, I am keeping my Prime membership cause I just renewed my membership today. Besides if Amazon’s master plan comes true, then we’ll be paying $99 to have automated drones deliver our purchases soon enough.
Now I would pay $99 dollars for THAT kind of service.
Any thoughts about this price increase by Amazon? Join the discussion here!