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April 3, 2024

How The Ad-Supported Tier Has Affected Amazon Prime Video and its Stakeholders

Over two months have passed since Amazon introduced ads in Prime Video. How have things changed? By: Kritchanon Tan Kian Wei

In September 2023, Amazon announced that Prime Video would be converting its existing subscriptions into ad-based ones and offering an ad-free option for an extra US$2.99 per month, leading to lots of backlash. Recently, on January 29 2024, the ad-supported tier was launched in the US. This means that, in the US, Netflix, Disney+ Hulu, Peacock, ESPN+, Max and now Prime Video all have ad-supported tiers. In April 2024, what does the situation look like now for Amazon? Has this move been a success or a failure?

When ads were first rolled out on Prime Video, there were, understandably, lots of backlash due to the introduction of ads while users paid the same price. However, many also complained about the poor handling of ads by Amazon, creating an extremely frustrating user experience. Rather than strategically placing ads at less intrusive moments of TV shows and films, such as between scenes, in order to minimise disruption, ads would roll in the middle of dialogue or high-intensity sequences. Additionally, on top of the introduction of ads, Amazon also withheld the Dolby Vision HDR and Dolby Atmos surround sound features from existing subscribers, forcing them to pay the extra US$2.99 for the ad-free tier to regain those features.

All this led to subscribers trying to sue Amazon for the change, with a class-action lawsuit being filed in California in February 2024, which called out Amazon for being “unfair,” “deceptive” and “unlawful.” Amazon had started offering ads for existing subscribers by default and giving them the option to pay more, unlike Netflix and Disney+ which did not take away anything from existing subscribers but instead opted to introduce a cheaper tier with ads for new subscribers or existing subscribers looking to save money. The lawsuit seeks at least $5 million on behalf of users who subscribed before December 28 2023, and a court order to prevent Amazon from continuing to be deceptive.

However, business-wise, though Amazon has not yet revealed their earnings or subscriber counts for Prime Video following the implementation of ads by default, the Bank of America has forecasted that the move could generate nearly US$5 billion in additional revenue for Amazon, with US$3 billion from advertising dollars and US$1.8 billion coming from subscribers who choose to pay the extra $2.99 to continue their ad-free experience.

In summary, like password sharing crackdowns, though this is a move that will likely upset users and draw lots of backlash, it’s hard to deny that it helps generate more profits for such companies. Though perhaps, on top of placing ads in less intrusive positions, the move should have been implemented in a better way, like how Netflix and Disney+ introduced their new lower-priced ad-supported tier, rather than making the existing tier ad-supported by default. 

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