Prime customers got word of the price increase in an e-mail Thursday, explaining that the program has grown rapidly since it was introduced in 2005, and simply could not operate with a membership fee of $79 a year. The higher fee will be charged when users renew their memberships. New customers who sign up in the next seven days can lock in the annual $79 rate.
Comparing Prime directly to other streaming video services, the price increase would make Prime more expensive than similar streaming products, such as Netflix and Hulu, which cost about $96 a year. But it's not quite an apples-to-apple comparison, given the shipping discounts.
It's rare for Amazon, which has been content to be a loss-leader, to raise the cost of a product. But the firm said that the logistical costs of Prime have forced its hand.
"Even as fuel and transportation costs have increased, the price of Prime has remained the same for nine years," the e-mail message from the Prime team said. "Since 2005, the number of items eligible for unlimited free Two-Day Shipping has grown from one million to over 20 million. We also added unlimited access to over 40,000 movies and TV episodes with Prime Instant Video and a selection of over 500,000 books to borrow from the Kindle Owners' Lending Library."
Amazon confirmed last year that Prime has at least 20 million members, so a $20 price increase gives the company about $400 million more to put toward infrastructure and content costs. Both are critical as the company continues to build out its range of in-house products, such as the Kindle line of e-readers and tablets, and ramps up its investment in original content to compete with streaming services such as Netflix. There are also rumors that Amazon is looking into a low-cost game console and a streaming set-top box.
And, of course, someone has to pay for that army of drones.