Amazon Prime is a great deal, and has been since the days it only offered free shipping. Today, the subscription service still includes that free two-day shipping but also adds a large streaming video collection and a digital e-book library to the $79 a year package. But there are indications from the company that Prime at this price point isn’t sustainable, and that the price could go up by as much as $20 to $40 per year in the future.
Amazon CFO Tom Szkutak delivered the news during the company’s Q4 earnings call yesterday, citing rising fuel and transport costs, as well as the fact that the Prime service is extremely popular with Amazon customers.
Amazon seems to have reached a point where the costs associated with members using Amazon Prime are actually eclipsing the revenue those members are bringing in. This works against Prime’s mission to help people spend more money on Amazon.com.
News like that is never taken well by the market; Amazon’s stock took a 10.6 percent hit in after-hours trading.
Amazon missed on its projected revenue for Q4, coming in at $25.59 billion. That is well short of the $26.06 billion many expected. Amazon has traditionally skirted by on slim revenues and profits — it’s how the company can afford to experiment in different areas — but a miss this big almost certainly has execs feeling some heat.
There’s no word at this time if or when Amazon will move forward with a price increase to Amazon Prime. The service launched all the way back on Feb. 2, 2005, offering free two-day shipping at the same $79 per year price that customers enjoy today. Should the price go up, it would be the first increase to Prime in nine years.