Amazon Prime in Expansion Mode Since $20 Membership Fee Increase
Amazon’s new Prime Pantry service, its deal with HBO for exclusive streaming rights to select original series and a premium scan-and-order service called Prime Fresh that’s being tested in California are all giving existing and prospective Prime members a reason to take a new look at the re-priced service. Amazon announced in February that it would raise the Prime membership fee by $20 to $99 a year (CED Feb 3 p5), with Chief Financial Officer Tom Szkutak saying then that drivers for the price hike included increased costs of fuel and transportation and higher usage among Prime members.
Prime-related services have expanded since the announcement, with some services adding a premium to Prime fees. The most recent rollout, Prime Pantry, which launched Wednesday, ships a set-size four-cubic-foot box with a maximum weight of 45 pounds that offers Prime members “popular household essentials” for a delivery fee of $5.99 per box. Product categories include food, snacks, personal care, pet items, health and nutrition, household goods and baby items.
Wedbush Securities analyst Michael Pachter said in a research note that the new Prime services “reflect continuing innovation” in the Prime offering and predicted it will “continue to grow rapidly” throughout the year, “likely driving revenues above expectation.” But the cost of the initiatives “will likely limit earnings upside,” he said.
News site BGR and others reported Friday on rumors of an Amazon smartphone to be released in coming months with a data plan called “Prime Data.” It speculated that a Prime data plan could give Prime members who buy the phone “a certain amount of free access to streaming movies, TV shows, music and other Amazon services over cellular data networks.” Amazon didn’t immediately comment.
On Amazon’s earnings call Thursday, Szkutak said in Q&A that the company is encouraged by customer response to the Prime plan since the price increase. While it’s still early, with the price hike taking effect March 20, the number of Prime subscribers has grown week over week, he said. The adoption of new trials since the increase took effect is growing “very nicely,” he said. Prime trials last for a month.
Amazon sales from products and services for fiscal Q4 were $19.7 billion, up from $16 billion in Q4 2013, Szkutak said. Profit was $108 million compared with $82 million in the 2013 quarter, the company said. Shares closed down $33.32 to $303.83.