Amazon Looks to Add $3 Billion in Profit Through Prime Video Ads
By Movieguide® Contributor
As January comes to a close, Amazon Prime Video becomes the final major streaming service to incorporate ads onto its platform, as it expects to add up to $3 billion a year through commercials.
Starting on January 29th, Prime Video users will now get ads while watching TV shows and movies unless they pay an additional $2.99 per month on top of their Prime subscription. Though the platform promises to feature “meaningfully fewer ads than linear TV and other streaming TV providers,” this new addition will lead to incredible profits for the company.
Morgan Stanley predicts the company will generate $3.3 billion in Prime Video ad revenue during 2024, rising to $5.2 billion in 2025 and a staggering $7.1 billion in 2026. Analysts from MoffettNathanson are less optimistic, forecasting $1.3 billion for 2024 and $2.3 billion for the following year. Either way, Amazon will take a lion’s share of profit through this simple change.
“This Monday, we are going to find out what happens to an advertising market when a brand-new entrant with excess capacity, unrivaled first-party data advantages and massive unduplicated reach decides to put a ‘for sale’ sign in its windows,” said MoffettNathanson analyst Michael Morton.
“We strongly believe that Amazon’s decision to add advertising to Prime Video will be a disruptive force in commoditized AVOD players, siloed CTV platforms and non-top 20 linear cable networks,” the MoffettNathanson team added.
Adding ads onto Prime Video will bolster Amazon’s already shocking ad revenue intake of $12.06 billion during Q3 of 2023 – a 26% increase year-over-year. Prime Video has also recently announced numerous projects to release in upcoming months as the platform looks to draw in even more customers.
Prime Video has found success targeting specific markets in the past, with the acquisition of Thursday Night Football in 2023 leading to a jump in viewership. In the past month, the platform has announced plans for faith-based content – in partnership with Jon Erwin – professional video game content and talks of a $100 million deal with YouTuber MrBeast.
Through these newly announced plans, the company hopes to reach untapped markets and further increase its advertiser reach.
Movieguide® previously reported:
While many streaming services have introduced ads onto their site in the past year, Prime Video’s upcoming switch is markedly different and could forever change the entertainment landscape.
On Jan. 29, Prime Video will start to show ads with its service, with Prime users having the option to remove them for an additional $3 per month. This introduction will turn Prime Video into the world’s largest ad-supported streaming service, netting billions in revenue for the tech giant.
The introduction of an ad tier is not a new concept. Multiple streaming sites executed this shift with a high level of success. Ads have arguably saved the streaming industry by allowing sites to quickly and reliably generate the additional income needed to become profitable.
Amazon’s switch to ads, however, will be notably different as current subscribers will be enrolled in the ad tier automatically rather than the ad tier becoming an option at a lower price point. Because of this subtle difference, Amazon executives believe few people will choose the ad-free level, even though it only costs $3 more.
With over 200 million Prime subscribers worldwide, experts expect the introduction of ads to generate an additional $2-3 billion for the company, with up to $2 billion more coming from those who pay the $3 fee to remove the ads.
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