Amazon Prime Video subscribers will soon encounter more ads during their favorite shows and movies, as the streaming giant aims to increase its ad revenue. Starting next year, Amazon will begin inserting ads not only at the start of programs but also in the middle, similar to traditional TV broadcasting. This move comes after Amazon introduced ads for paid subscribers last year, though viewers can still pay extra to avoid them.
Interestingly, despite these changes, Amazon claims it has not seen a significant drop in its subscriber base. According to Kelly Day, Vice President of Prime Video International, the platform plans to expand the number of ads shown by 2025. While many streaming platforms like Disney+ and Netflix offer cheaper, ad-supported tiers, Amazon’s approach forces all subscribers into ad-watching unless they pay an additional fee.
This bold strategy, as Day acknowledges, may seem counterintuitive, but Amazon reports that it’s working better than expected, with little evidence of mass cancellations. Moreover, the ads will soon become interactive, allowing viewers to purchase directly from them using their remote or smartphone. With $12.8 billion already generated from digital ads in the second quarter of 2024, Amazon expects this shift to be a significant revenue driver.
This shift highlights how companies balance customer experience and revenue generation, with subscription models evolving to maximize profits while offering choices to consumers.
THINK LIKE AN ECONOMIST!
Q1. Define the term revenue stream.
Q2. Explain why Amazon might decide to increase the number of advertisements on its platform.
Q3. Analyse how an increase in ad-supported content could affect the demand for Amazon’s ad-free subscription tier.
Q4. Discuss whether offering an ad-free experience at a premium price is beneficial for both Amazon and its consumers.
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