Amazon Prime: New monthly subscription option steps up rivalry with Netflix, Hulu

November 6, 2012

A new pricing option quietly appeared on Amazon’s Prime service Tuesday — the option to pay $7.99 per month for the service instead of the normal annual $79 fee.

The pricing test was first reported by the blog Hacking Netflix.

Quick arithmeticians may note that paying month-to-month ups the price of Prime’s service for a year, common for pay-as-you-go plans. But the monthly price is also significant because it’s exactly the monthly cost of a Netflix or Hulu Plus account.

Amazon doesn’t have the same selection of films or TV shows that it competitors do, making it less likely to be — for example — the service consumers buy in lieu of a cable subscription. The annual pricing model has also driven off consumers who don’t want to pay $80 upfront and possibly get locked into a service for that long.

That’s what makes the month-to-month model appealing — it allows more flexibility. And the timing, just before the holidays, couldn’t be better.

That’s because Amazon has something that Netflix and Hulu will never have — Amazon.com.

Amazon Prime, after all, doesn’t only come with streaming video. Customers get free two-day shipping from the retailer’s massive online store.

The new subscription option could boost sales for Amazon in the crucial holiday quarter while helping the company get its Prime service in front of more potential consumers. As Venture Beat’s Sean Ludwig noted, this is exactly the time when “you might want to sign up for Prime benefits for a few months.”

Of course, Amazon is hoping that those who sign on for the holidays end up liking the service so much that they stick around for a while — and perhaps pick up a Kindle tablet to make it even easier to watch video from Prime. Amazon is sealing more content deals every month, making up some ground in its video offerings, but it’s still not as varied as Netflix or Hulu.

Being able to bundle its services in a compelling way to customers is why Amazon has seen so much success, even though it’s often losing money on the services and products that it offers. It’s a strategy that’s played out with the Kindle and is unspooling with the Kindle Fire.

In the short term, the pricing model allows consumers to try out Prime, as long as they keep in mind that its video selection isn’t as rich as other sources — at the moment.

Hayley Tsukayama covers consumer technology for The Washington Post.
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