The price of goods and services in the United States continues to rise at an alarming rate. Inflation was up 7% year-on-year in December 2021, which is the highest the country has seen in nearly 40 years. Used cars and trucks were the largest contributors to the inflation rate. Rising food prices also contributed to inflation.
Now, you can add Amazon Prime to the list of inflation drivers. But, how much has a Prime subscription gone up in price? And who will be affected? Is it justified? Let’s find out.
Amazon Is Upping Prime Subscription Fees
In February 2022, Amazon announced that it’s raising the price of its Prime membership from $119 per year to $139 per year. Amazon also increased month-to-month subscriptions from $12.99 to $14.99. On the bright side, video-only subscriptions will remain unchanged at the current price of $8.99 per month.
Low-income subscribers have also been affected. Students will have to pay $7.50 per month or $69 per year. Those on government assistance, such as Electronic Benefit Transfer, will see their monthly rates increase from $6 to $7.
New members will pay the increased prices starting February 18, 2022. Existing members will pay the updated fees on the renewal date starting March 25, 2022. This price hike will only affect users in the United States for now.
Is Amazon Justified in Raising the Price of Prime?
One may argue that no one asked for all the extra Prime benefits that Amazon cited as a cost driver since most people won’t use all of them anyway. Although the company’s profits fell by a whopping 50%, from $6.9 billion to $3.5 billion in the last quarter of 2021, it’s still making a lot of money.
In any case, the $20 price hike will add around $2 billion in operating income to Amazon, according to long-time Amazon analyst Mark Mahaney as reported by Business Insider.
Plus, according to Morgan Stanley, households with Prime membership spent over $3,000 on Amazon on average in 2021, which was twice as much as shoppers without the subscription. So, perhaps Amazon should have kept prices steady in solidarity with the US consumer?
What you’re about to read next may seem contradictory, but there are two sides to a coin.
Yes, Amazon Prime’s Price Hike Is Probably Justified
Amazon raised starting wages for all US employees to at least $15 per hour in 2018. In addition, as mentioned before, inflation is the highest it has ever been for almost forty years in the United States. Amazon has thus been feeling the pressure in operating costs across the board.
Prime has added more benefits for members. This includes same-day delivery to 90 metropolitan areas in the US, free shipping for more products, including groceries, unlimited photo storage on Amazon Photos, discounts at Whole Foods Market, and free magazines and books via Prime Reading. Members didn’t ask for these benefits, but according to Amazon, members are using them more than ever.
Amazon is also spending more on new content. CFO Brian Olsavsky says Prime Video has tripled the number of Amazon originals since 2018. According to The Hollywood Reporter, The Lord of the Rings series will cost Amazon roughly $465 million for its first season alone. The company also made a deal with the NFL, where it will pay $10 billion to stream Thursday Night Football for 10 years, beginning next season.
Amazon Prime’s First Price Hike Since 2018
Considering it has been four years since Amazon last bumped up prices, a hike was probably overdue. Even last time, the company increased the Prime subscription fee by $20 and cited higher costs around shipping and member benefits.
In 2014, Amazon Prime went up from $79 to $99 annually. However, between 2005, when Amazon Prime launched, and 2014, the price had stayed constant at $79 per year for ten years. However, this particular move comes shortly after Netflix hiked prices for all its plans in the United States and Canada.
Just because you’re separated from family and friends doesn’t mean you can’t watch movies together with them online.
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