Amazon offers monthly plan for Prime for $7.99?
I’m seeing reports this morning that Amazon is offering a $7.99 monthly plan for Amazon Prime, as opposed to just the $79 annual plan for most people.
I don’t see that on line yet, but I’m going to write this taking that as a postulate.
This would be a mind-blowingly huge change, and one that would make some investors quite unhappy. It wouldn’t surprise me to see the stock dip a tiny bit (and then recover) on the news.
It might not seem like much of a difference. Pay $79 once a year, or $7.99 a month. In fact, the $7.99 a month is higher that the approximately $6.58 you get if you divide $79 by twelve.
However, it would likely make Prime much more expensive for Amazon…and it’s already expensive for them.
Why?
Simple: you don’t buy things consistently across the year. In November and December, people probably purchase a lot more things from Amazon, especially physical items.
If people can sign up for November, renew in December, and then not renew in January, the customers take advantage of free shipping during the expensive months, and then Amazon doesn’t get the $6.58 during months when the customers order little or nothing.
It would be like people paying for a monthly gym membership just in January (when you get all the New Year’s resolutions people) and then not paying the rest of the year…rather than signing up in January for the whole year.
This suggests to me that Prime is working really, really well to inspire purchases on profitable items. Just as Amazon reportedly doesn’t make money on the Kindle Fire HD itself but hypothetically makes it on inspired sales, Amazon could lose money on Prime and make it up on the items purchased.
For investors, though, they would likely see the loss of the guaranteed income spread out over the lean months and of the up front money of the annual fee.
The marketing on this would also suggest going head-to-head with Netflix, rather than emphasizing the free shipping advantage. Prime streaming video at no additional cost can most easily be compared to Netflix.
It’s hard to compare the KOLL (Kindle Owners’ Lending Library) to something else, since the public doesn’t really perceive a direct competitor to it.
Free shipping is going to be a common perk during the holiday season.
So, if they are doing this, it’s about the videos.
I have to presume this would be automatic renewal: doing nothing, and you get charged another $7.99. Maybe the thought is that most people would just let it ride, even though they could cancel.
Once you have Prime for the videos, why not take advantage of the free shipping?
If you are buying what I like to refer to as those “diapers and windshield wipers” from Amazon, would that become a habit for you?
My guess is that, if this is actually happening, it could work out very well for Amazon in the long run…but that some skittish investors wouldn’t see the long term advantage.
We’ll see what happens. If you are seeing the $7.99 per month option, feel free to let me and my readers know by commenting on this post. It could just have been an experiment or an accidental early leak.
If it does happen, I think Netflix should be worried about it. It could be perceived as “they both have videos” (even though the library is different), but with Amazon, you also get free shipping on other stuff and that ability to borrow a book a month.
Fascinating times…
Update: I’ve now seen the offer on line, although it doesn’t seem to appear in any of the “official places” besides on the join Prime page itself. By signing out of my account,then clicking the Join Prime link at the top of the screen, I could see this under the free month of prime button:
“After your free trial, Amazon Prime is just $7.99/month”
Thanks to Meya, a Kindle Forum Pro, for posting that.
This post by Bufo Calvin originally appeared in the I Love My Kindle blog.
but trust me, this is a very big number.
They do list five as Coming Soon, showing they are adding titles.
