Amazon Prime is about to get more expensive: Prime price rise comes despite Jeff Bezo’s firm doubling profits in 2018
A week after Amazon boss Jeff Bezos wrote a letter to shareholders to announce just how popular Amazon Prime and its range of Echo devices were over the past year, the company’s full earnings report has confirmed it.
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Amazon keeps going from strength to strength and the company more than doubled its profit during the first quarter of 2018. Amazon also announced that it is expecting to see similarly strong results in spring, but there was a sting in the tail for its customers – the price of Amazon Prime is rising to $119, up from $99, in the US.
It’s not clear when, or if, this price rise will come to the UK and Alphr has contacted Amazon for clarification. A similar price rise in the UK would see the service increase to £99 from £79 a year.
This latest Amazon Prime price rise comes just months after the monthly prices of Amazon Prime were increased. That particular rise saw the price of a monthly Prime memberships for new members go up from $10.99 to $12.99, and the price of the discounted Amazon Prime Student monthly plan for new sign-ups rise from $5.49 to $6.49, as of 19 January, 2018.
Amazon Prime price rise
Prime is Amazon’s “loyalty club” and comes with free delivery on thousands of items, access to its Prime Video service, exclusive discounts, on products and services such as Amazon Music, and early access to deals on Prime Day and beyond.
In Bezo’s recent shareholders letter, he revealed Amazon Prime now has more than 100 million subscribers.
Defending the decision, Brian Olsavsky, Amazon’s chief financial officer said on the earnings call on Thursday: “We do feel it’s still the best deal in retail” before adding the number of compatible Amazon Prime items has “grown fivefold since the last price increase four years ago.”
The Amazon Prime price rise is expected to add significantly boost Amazon’s subs revenue, already up 60% in the first quarter of the year at a staggering $3.1 billion.
Following the call, shares in Amazon rose 7% to a record high, adding $8 billion to the net worth of Bezos. The company also made $1.6 billion in profits from its advertising department and Amazon Web Services (AWS). The latter posted a 49% rise in sales compared to last year, to $5.44 billion.
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Revenue from third-party sellers paying to promote products on Amazon grew 139% to $2.03 billion, which included $560 million from an accounting change. Amazon predicts its operating profit this quarter to be between $1.1 billion and $1.9 billion, up from $628 million this time last year.
Elsewhere on the call, Amazon said it is expanding across industries following $130 million deal with the US NFL to stream Thursday night games. It’s also expanding its delivery network from Whole Foods stores, which it acquired last year. The company also plans to increase its video content spending this year, and the third quarter of the year will see extra spending ahead of the holiday season and Black Friday.
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This continued success is likely to irk those who believe Amazon is getting too powerful. The UK’s Sir Vince Cable recently called for the big tech companies like Google, Amazon and Facebook to be broken apart to stop the “monopoly of data from limiting innovative start-ups,” and Donald Trump has repeatedly taken aim at Bezos in recent months.
Seemingly jealous of his ever-increasing wealth, Trump tweeted: “If @amazon ever had to pay fair taxes, its stock would crash and it would crumble like a paper bag. The @washingtonpost scam is saving it!” The latter comment is in reference to the fact Bezos bought The Washington Post in 2013, and the paper writes stories about Trump, which the president has famously called “fake news.”
The former comment refers to Amazon’s tax practices, which have been slammed both in the US and the EU. In October, EU competition chief Margrethe Vestager ordered Amazon to pay back “illegal” tax benefits to Luxembourg of around €250 million (£221 million).