Amazon Is Raising The Price Of Prime

Why Amazon Is Raising The Price Of Prime Memberships This Year: Analysis

Jean Baptiste Su , CONTRIBUTOR
Vice-President and Principal Analyst at Atherton Research
Opinions expressed by Forbes Contributors are their own.

The 20% price hike of Amazon Prime subscription this year will boost the company's top and bottom lines in 2018. (Photo by Ant Palmer/Getty Images)

Amazon announced Friday an immediate price hike of $2 for its Prime monthly subscription, from $10.99 to $12.99 a month - nearly a 20% increase.


Students will also see their discounted monthly subscription jump from $5.49 to $6.49, an 18% increase.

However, existing monthly Prime and Prime Student members will pay the new price for renewals happening next month, after February 18.

Perks of the Amazon Prime subscription include free 2-day shipping on more than 100 million items, unlimited streaming of music (Prime Music), movies and television shows (Prime Video) and cloud storage for photos.

Amazon will soon raise its annual memberships as well

The good news is that the price of annual Prime memberships stays the same, at $99 for regular customers and $49 for students, which are by far the most popular and economical membership plans, especially if you compare it with the monthly options which will end up costing you around $160 and $78 per year, respectively.

However, our analysis suggests that Friday's announcement is just a prelude to an even bigger one: Amazon will soon - in the next few months - be raising the price of its popular annual membership, most likely to $119, also a 20% increase and the first in 4 years.

But why?



Amazon is heavily investing in its logistics infrastructure (warehouses, trucks, planes) to cut costs and shorter delivery time. (Photo by Stephen Brashear/Getty Images)

The shortest answer is... because Amazon can.

Besides, at $119, $160 or even $200, Amazon Prime will still be a great value.

A lot of the products sold by Amazon are not only cheaper than at traditional retailers but also are delivered right at your doorstep, in 2 days or sometimes the same day. Which means fewer trips to the store, no waiting in line at the register, etc.

And when you add the digital services (music, video, and photos), it's just a no-brainer: price, selection, convenience, and service are what makes Amazon Prime one of the best deals on the Internet.

On the financial side, Prime's price hike will significantly boost Amazon's top (sales) and bottom (profits) lines in 2018 which will positively impact both its share price - Amazon has the highest price-to-earnings (PE) ratio of any company in the S&P 500 stock index at more than 300 times - and increase its capacity to re-invest in its business (logistics, content, new verticals...), through acquisitions for example.

On a final note, Amazon Prime in other regions of the world is much cheaper than in the U.S. - except for the UK where it costs $109.50 a year.


For example, Prime costs $85 in Germany and Austria, $63 in Canada, $60 in France, Holland, and Belgium, $35 in Japan and around $25 in Italy, Spain, and Mexico!