A MARTÍNEZ, HOST:
If you subscribe to Amazon Video, you might have noticed a lump of coal in your inbox recently - a notice that movies and TV shows on Prime Video are getting ads starting January 29. Amazon began talking about a change like this earlier in the year. It eliminates the platform's long-standing commercial-free policy for streaming video, something many customers have grown very accustomed to. Here to tell us more about what's driving the change and what it means for streamers is NPR TV critic Eric Deggans. Eric, I stream, I'm sure you stream - most of us stream. What does this mean for us?
ERIC DEGGANS, BYLINE: Well, of course, Amazon's not the first streamer to place ads in their content library. But when some other streaming services, like Netflix, wanted to feature ads inside their programming, they created a cheaper membership. Amazon is basically converting everyone who has Amazon Prime, which includes services beyond streaming, into an ad-supported streaming membership. So if you do nothing, then on January 29, you'll begin to see what they're calling limited advertisements in movies and films. They say that there will be fewer ads than on most broadcast cable TV or other streaming services.
MARTÍNEZ: Can I opt out of these ads?
DEGGANS: Well, to keep your commercial-free experience, you have to sign up for a different tier and pay an extra $2.99 per month. Now, if you've got a current Amazon Prime membership, you're already paying about $15 per month or $139 if you pay a lump sum annually. Now, there's some people who'd pay just for access to Prime Video streaming alone, that's about $9 a month, and they still have to pay that extra $2.99 to avoid commercials.
MARTÍNEZ: All right, pay more, no ads. I always wondered about this, Eric. Why not just raise the prices for everyone and avoid ads altogether? I mean, it seems to make sense to me.
DEGGANS: Well, my hunch is that it comes down to a few things. First, streaming services know that when they raise prices, that can make people cancel memberships. That's called churn. Now, Netflix had a serious crisis in 2022, for example, when they saw a dip in subscriptions right around when they raised their fees. Amazon's strategy means that most subscribers won't see their fees go up if they do nothing, which might limit churn.
Now, another challenge that some of these streamers have when they start these ad-supported subscriptions is getting people to sign up for them in the first place. Now, Amazon's strategy ensures that a lot of Amazon Prime subscribers will probably see the advertisements, which might allow them to sell the ads at a higher price and attract more advertisers. And finally, if they don't create a cheaper subscription fee, a tier, then Amazon also isn't cutting into its potential revenue quite as much.
MARTÍNEZ: Now, as you pointed out, Amazon Prime subscribers get a lot more than just access to streaming video. Does that make it tougher to access the benefits to Amazon?
DEGGANS: Well, Amazon says this is about increasing investment in content. But because Amazon Prime members get access to other features, like free shipping, it's tough to know how much of that fee actually funds streaming. Now, we've seen competing services like Netflix, Disney+, Hulu raise their subscription fees, create ad-supported subscriptions, crack down on password sharing and bundle services, all in an attempt to squeeze more revenue out of subscribers while minimizing churn. Amazon's latest move isn't that surprising. It's kind of a step back to the old models of ad-supported platforms like cable TV and broadcasting, and it suggests that higher fees and more ads are something that most streaming customers are going to have to contend with in 2024.
MARTÍNEZ: OK. That's NPR TV critic Eric Deggans. Thanks, Eric.
DEGGANS: Thank you.
MARTÍNEZ: And we want to note that Amazon is a financial supporter of NPR. Transcript provided by NPR, Copyright NPR.
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