retail news in context, analysis with attitude

Amazon.com announced yesterday that for the first time, it will offer its Prime membership - which gives subscribers automatic two-shipping and free online streaming of movies and television programs - on a monthly basis for $7.99 per month. Previously, Prime was sold only on an annual basis for $79 per year.

Analysts say that the move is designed to position Amazon as being more competitive with streaming services offered by Netflix and Hulu.

Amazon isn't saying much about the move. A spokesperson tells the Seattle Times, "We are always looking at ways to improve the shopping experience for our customers. We are testing a monthly Amazon Prime subscription. Beyond that we don't have anything further to offer."

The Times writes that "adding a more accessible monthly Prime option just before the busiest retail season of the year could substantially boost Amazon's merchandise sales ... The strategy may be expensive for Amazon, though. The company assumes more shipping costs with Prime, but as an annual program, it enticed people to become more regular, long-term customers."
KC's View:
Amazon is gambling that people who start using Prime will get hooked, and switch to the annual program. Which I think is a pretty good bet. It isn;t hard to imagine that after the holidays, Amazon could send folks on the monthly Prime program an email telling them how much shipping money they saved by being subscribers, and suggesting that they can save even more by becoming annual users. (They could even apply the monthly fees to an annual membership, if they wanted to bait the hook a bit.)

At the moment, this move may position Amazon as more competitive with the likes of Netflix. But that's just frosting on the cake, since video streaming is still a small part of Amazon's business compared to online retailing.