Amazon put an official date on plans to introduce ads to Prime Video, telling customers via email last week that movies and TV shows on the streaming service will include limited advertisements starting January 29.
“This will allow us to continue investing in compelling content and keep increasing that investment over a long period of time,” Amazon said in the email, adding that it aims “to have meaningfully fewer ads than linear TV and other streaming TV providers.”
The move to introduce ads later this month doesn’t come as a surprise, as Amazon in September disclosed plans to do so, but at the time hadn’t set a specific date other than early 2024. In addition to the U.S. Amazon at the time said the U.K., Germany and Canada would be among the first markets to see ads on Prime Video, followed by France, Italy, Spain, Mexico and Australia later in the year.
However, unlike other streaming services that have introduced cheaper ad-supported tiers alongside existing commercial free plans, such as Netflix, Disney+ and others, Amazon is automatically including video ads for all customers of its Prime membership. Prime membership costs $14.99 per month or $139 per year, with Prime Video included as one of the perks. Consumers do have the ability to get commercial-free Prime Video through a new option that costs an extra $2.99 per month on top of Prime membership – but they’ll have to proactively signup for a plan without ads.
Amazon’s Prime Video already airs commercials during its coverage of Thursday Night Football, as well as on content via its free ad-supported streaming TV (FAST) service Freevee – which along with other live sports will continue to have advertising even for those that pay for the extra commercial-free fee.
In a note to investors last month, Macquarie Research senior media tech analyst Tim Nollen pointed out that Amazon’s approach to introduce an ad-supported tier “is in stark contrast” to the strategies of other streaming players, as it automatically signs up roughly 200 million Prime members to the ad-supported tier.
“Rather than waiting to get users onboard to the ad tier plans, Amazon’s strategy will immediately convert its users to an ad supported plan, and hence provide a sizable audience for ads from day 1,” wrote Nollen in a December 1 research note. “The opt-out inertia may be high, given findings from numerous studies on consumer choice, and we think Amazon customers will remain on the cheaper existing plan, now with ads, instead of paying more, given the hurdle of choice to elect to pay more.”
Others have been working to build up ad-supported audiences including Netflix, which in November disclosed amassing around 15 million users on its tier with ads about one year after launch.
Prime Video is already a leading streaming service, having grabbed 3.4% of total TV time in the U.S. in November, per Nielsen’s the Gauge, behind that of Netflix and YouTube.
“We think the flood of ad inventory, reportedly priced at $35 CPM [cost per thousand], could pressure CTV ad prices overall. But this in turn could push the industry toward using more and better programmatic bidding tools and more effectively target viewers as they seek higher CPMs,” wrote Nollen.
Adding another element for Prime Video this year is a continued push into live sports, which as mentioned, already and will continue to air ads on the service. In addition to existing TNF coverage, recent reports pegged Amazon as a potential investor for the bankrupt Diamond Sports Group, operator of regional sports networks for NBA, NHL and MLB teams, to distribute games on streaming.
“This would provide a wealth of sports content to Amazon that it could tie into its vast customer data for targeted product marketing, and would render it a much bigger competitor for sports rights in general,” wrote Nollen in a December 22 research note. Still, the analyst noted RSN streaming could depend on the willingness of NBA and MLB to agree as they’ve indicated interest in bringing rights in-house.
On the live sports front, most recently in November Amazon was among four distribution partner winners for rights to the NASCAR Cup Series. Under a seven-year deal starting in 2025 Prime Video will exclusively stream five midseason races, as well as practice and qualifying sessions for the first half of the season throughout the last race of its midseason series. The coverage on Prime Video marks the first time NASCAR granted exclusive streaming rights for races. Warner Bros. Discovery, NBCUniversal and Fox Sports also nabbed rights for the series.