Amazon.com Inc. is increasing the price of its Prime subscription service in the U.S. for the first time since 2018.
The move was announced Thursday, as Amazon AMZN, -7.81% revealed holiday earnings that handily beat Wall Street’s expectations. The new price will be $139 a year, up from $119 previously, or $14.99 a month, up from $12.99. The new price will apply to renewals that take place after March 25, and new subscriptions as of Feb. 18.
Amazon Prime includes a streaming service that attempts to rival Netflix Inc. NFLX, -5.56%, as well as free delivery that Amazon has been trying to get down to a single day after previously promising to have goods to customers in two days. Amazon has been spending billions of dollars in recent years to deliver goods faster, which has been a drag on profit, especially as the COVID-19 pandemic has led to supply-chain and staffing difficulties.
“Since 2018 in the U.S., availability of Free Same-Day Delivery has expanded from 48 metropolitan areas to more than 90, items available for Prime free shipping have increased over 50%, and members have saved billions of dollars shopping Prime Day,” an Amazon statement included with earnings reads. “This is all on top of new program benefits like prescription savings and fast, free delivery from Amazon Pharmacy and the continually growing Amazon Music for Prime members, Prime Reading, and Prime Gaming.”
Jefferies analysts predicted the price increase in a note ahead of earnings, writing, “Increasing the fee again this year seems reasonable and would maintain the latest cadence of about four years.”
“Both prior increases have been for $20, so that’s a reasonable conservative basecase assumption (from $119 to $139), although a new increase would likely be larger since Amazon is facing substantial wage inflation,” they wrote, while estimating that Amazon has about 140 million Prime subscribers in the U.S.
Worldwide, Amazon executives disclosed there are 200 million Prime members, roughly two years after the company announced it had passed 100 million.
“In 2021, members in the U.S. received more than 6 billion free deliveries, and over 200 million Prime members worldwide streamed shows and movies,” the earnings statement said.
In a conference call Thursday afternoon, Amazon Chief Financial Officer Brian Olsavsky reiterated that the changes Amazon has made to Prime in recent years makes the subscription more valuable, and confirmed that only the U.S. faces the increase.
“We felt especially after not raising the price the United States in 2018 that the time was right to raise it and we think it’s a much more valuable program today than it was in 2020, let alone 2018,” Olsavsky said in response to a question from an analyst. “So other countries we will continue to evaluate every year and nothing else to announce right now.”