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Analyst: Amazon Prime Membership Tops 27 Million Globally

28 Jul, 2014 By: Erik Gruenwedel

Loyalty program continues to resonate with consumers while upping Amazon’s fiscal headache

Amazon’s Prime loyalty membership program, which includes free two-day shipping on most purchases and unlimited streaming access to movies and TV shows, may be turning into a double-edged financial sword for the e-commerce behemoth as consumers embrace it.

Despite a $20 price increase to $99 for new annual members instituted earlier this year, Prime’s net membership in Amazon’s most recent fiscal quarter grew compared with the prior-year period, reaching about 27 million globally, according to Wedbush Securities analyst Michael Pachter.

Amazon does not post quarterly Prime membership data updates, but last January said it had at least 20 million members worldwide. Regardless of the exact figure, Prime members purchase about four-times as much as non-Prime members, according to Wedbush.

But those purchases, which include packaged media and books, must be shipped within 48-hours — a cost that is real to Amazon’s bottom line, and prompted the 20% price hike. It also contributed to the e-commerce site reporting an unexpected $126 million loss in its fiscal quarter.

That loss is expected to balloon past $800 million in the third quarter, in part as Amazon ups Prime Instant Video content spending by $100 million in the period — the majority on original programing. That spending uptick does not include previously-announced SVOD access to select HBO catalog content — a first for the Time Warner premium channel.

“While [Amazon] has not disclosed its annual aggregate spending on Prime Instant Video content, we estimate that the addition of HBO and original content is likely to drive overall spending over $2 billion this year,” Pachter wrote in a July 28 note.


About the Author: Erik Gruenwedel

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