The Amazon Prime price hike and what it means to Netflix

I’m a big fan of Amazon Prime, have been since the very first day. The original goal of Prime was to build loyalty. If I’ve already paid my $79 for the year, I get free 2nd day shipping on anything I order through Amazon. And if I already have free 2nd day shipping and the price of an item is as low or lower than anywhere else I could buy it, why would I go elsewhere? Very smart.

Now Amazon has raised the price of Prime to $99 per year. I’m in. No matter the reasoning behind the price hike, it’s been about 9 years without a price hike and Amazon’s costs have certainly gone up. In addition, I get lots of streaming content and a huge lending library of free books if I happen to own a Kindle (which I do).

The price raise will mean hundreds of millions in additional annual revenue for Amazon. Good for Amazon, but also good for Netflix. Amazon’s streaming video service is a strong competitor for Netflix. Though Amazon does do a lot of à la carte video rentals, the rentals and discounts included with Prime offer are similar enough to Netflix’s model to be considered a competing service.

With the price hike, Amazon has just taken a bit of pressure off of the Netflix pricing model. Netflix has been facing a financial squeeze, a choice between reducing content to save money or raising their prices in order to stay competitive. With the Prime price hike, Netflix has a little bit more breathing room. Though that might sound counterintuitive, that will make Netflix a better service.

As much as I am a fan of Amazon Prime, I am even more a fan of Netflix and the new net-driven studio model they represent. And this $20 Prime price hike will be good for both companies.