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How Does Amazon Make Money on Prime Video

John McKinney    |
John McKinney

Prime Video is a video streaming service for Amazon Prime members. Amazon Prime membership gives you access to thousands of Prime Video titles at no additional cost.

Prime membership includes a library of movies and TV shows across every category, romantic, comedies, classics, and Amazon Original Movies series. Premium features include 4K Ultra HD, High Dynamic Range (HDR), and mobile downloads for offline viewing of select content.

Amazon's two tiers of video are Prime Video, which is a Netflix-like service-connected to Prime (or readily available independently for $8.99 monthly). Amazon Instant Video, a "lease or buy" service like iTunes. And you can search both at the same time.

Amazon launched the prime membership subscription service in 2005 at an annual price of $79. And the only benefit of being a member was free two-day shipping. Since then, Amazon hiked twice the amount it charges for Prime, and it stands now at $119/year. But today, Prime includes many more benefits, and Prime Video is one of them.

Netflix might be leading the streaming video world. Still, there's one huge benefit Amazon has in the space: it does not need to earn money on its Netflix competitor, Prime Video. 

"Prime Video helps Amazon generate income in other ways." Amazon CFO Brian Olsavsky highlighted the worth of video to Amazon throughout its earnings. And while that difference might be affected other than exposure to Prime Video, Olsavsky suggests Amazon sees Prime Video as a driver.

How does it work?

In a current survey carried out by CutCableToday (independent of its website), Amazon Prime customers found to be ten times as likely to rent or buy films from Amazon Immediate Video than non-Prime members.

Here's the scenario: you look for "The Revenant," which is not on Prime, but there it is sitting on your screen, offered to lease on Amazon for $5.99 with one click. You may go all out. In the study, 40% of 380 Prime members surveyed said they rent or purchased video from Amazon Video at least once a month, as compared to just 4% of non-Prime members.

When viewers get in the habit of watching on Prime to watch videos, which are free except under membership subscription, the company has a chance to sell them on renting or buying videos that aren't available, that's one of the advantages for Amazon.

You can spend for shows and movies on a specific rental basis as you see fit. If you buy a lot of things on Amazon, the Prime subscription is the one to choose. If you're in it for the films and shows, it'll depend on which exclusives you like. Prime Video needs you to pay to view some movies despite having a Prime membership. 

If, however, you wish to buy into Amazon's community and tend to purchase a lot of things online, an annual Amazon Prime membership deals higher worth for money. This is being offered to Netflix overall, but if you're an avid shopper, you may want to look into Amazon Prime Video. 

man watching amazon prime

Amazon has much to gain. 

The same way Netflix is making money through subscriptions. However, unlike Netflix, Amazon is earning more from its members than just the subscription fees. 

Besides the membership charge, Amazon has much to gain from offering significant benefits like video streaming to its members. Data shows that Prime members spend, on average more as non-prime members. 

By getting them to subscribe, Amazon buys itself, new loyal customers. Additionally, there are many free movies and TV shows on Amazon, increasing their chances you'll buy from them what you're interested in watching instead of turning to their competition.

It is merely by attracting audiences to the Amazon website. Amazon has worked out that the more time and engagement an Amazon or Amazon Prime customer has with the Amazon experience as a whole, the more money they will spend in the long run. 

If they spend a mere "couple billion dollars" on Amazon Prime Video content partnerships and Amazon produced programming, then they know what the return on this investment will be in the years to come.

It's building market share for the future when it corners the market on streamings, then it can begin to make money on those products. 

The avenue of monetization is likely to be advertising.  Amazon can attract hundreds of millions of regular watch time. It is only a matter of time before Amazon advertising will be a reality for Amazon Prime Video, making quite a decent amount of money for Amazon.

Amazon makes money from prime video.

Part of the Prime membership fee goes to pay for Prime video, but mainly by adding video streaming to Prime, it gets more people to shop more on Amazon. 

Amazon might theoretically never make a single cent directly off of Prime Video, and still, have the project be a resounding success.

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