The comms from Amazon – at the turn of the year – about introducing its new ad tier were fascinating for two reasons:

#1) Amazon said that it was making the change because it would “allow us to continue investing in compelling content and keep increasing that investment over a long period of time”.

[Speech bubble over my head: surely, they have the funds to do this already?]


#2) “Starting February 5, Prime Video movies and TV shows will include limited advertisements… We aim to have meaningfully fewer ads than ad-supported TV channels and other streaming TV providers.

[Ok. So some ads but not as many as its competitors. Do said competitors therefore need to match Amazon’s conditioning of viewer expectations (more ads = bad; fewer ads = good)?]


From a commercial perspective, what’s Amazon’s play here?

First, the opportunity is just too enticing: according to Morgan Stanley, the additional annual revenue through Prime Video ad sales and the $2.99 monthly surcharge that subscribers can pay to avoid ads will net Amazon around $5bn a year in the US alone. For Jeff Bezos (who I pictured in my mind as Blofeld stroking a white cat), it’s a win-win.

Second, Amazon is already the world’s third-largest digital ad seller, behind Alphabet and Meta’s platforms, with ad revenue surpassing $12 billion in Q3 2023 (up 26% from the period a year earlier) says the Wall Street Journal so, strategically, the fit is perfect.

There are challenges, however. The same WSJ analysis suggests that:

  • Amazon is late to the ad-tier streaming market behind Disney, Netflix, WBD who enjoy more established relationships with the advertisers that still spend the bulk of their money on broadcast TV
  • This is thus new territory for them and Amazon Prime Video, which isn’t perceived as a premium brand, has some work to do to woo big-spending brands
  • Amazon will need to continue producing high-quality original content (sure) and make judicious acquisitions of other companies (e.g. MGM) and live, appointment-to-view, events
  • And interestingly, it references a Bank of America forecast that roughly a third of subscribers are expected to opt for the ad-free version. 

For now, I’m choosing not to pay the extra and test how many ads I do end up seeing. If the UX is like YouTube, where one can skip ads or, indeed, the ads aren’t too obtrusive, I may remain seated on this side of the cost-benefit seesaw.


Kauser Kanji has been working in online video for 19 years, formerly at Virgin Media, ITN and NBC Universal, and founded VOD Professional in 2011. He has since completed major OTT projects for, amongst others, A+E Networks, the BBC, BBC Studios, Channel 4, DR (Denmark), Liberty Global, Netflix, Sony Pictures, the Swiss Broadcasting Corporation and UKTV. He now writes industry analyses, hosts an online debate show, OTT Question Time, as well as its in-person sister event, OTT Question Time Live

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