Amazon Plans Ad Tier for Prime Video Streaming Service
Summary
- Discussions come as ad buyers have been pushing for more access to premium shows and movies
Amazon is planning to launch an advertising-supported tier of its Prime Video streaming service as it looks to further build its ad business and generate more revenue from entertainment, according to people familiar with the situation.
The discussions, which the people said are in the early stages and have been going on over the past several weeks, come in the wake of cost-cutting reviews across the company’s businesses, resulting in tens of thousands of layoffs.
Advertising has been an area of continued growth for Amazon despite macroeconomic challenges. The company’s ad revenue was $9.5 billion in the first quarter, up 21% year over year. The company is the third-biggest player in terms of digital ad revenue in the U.S. after Google and Meta, according to Insider Intelligence.
Advertisers say they are eager to have Amazon offer an ad tier for Prime Video service, which would follow similar moves by other streaming platforms including Netflix and Disney. Specifically, ad buyers say they want more access to premium movies and programs that have remained largely ad free, content that often garners more buzz.
Prime Video—which is available to all customers who pay $14.99 a month for Amazon’s Prime membership, and on its own for $8.99 a month—has original shows like “The Marvelous Mrs. Maisel," a vast library of movies and live-sports offerings including the National Football League’s “Thursday Night Football" games.
Amazon has been making moves to bring more ad-supported programming to Prime Video. Its sports coverage comes with ads, and some shows have product-placement advertising. Prime Video also offers access to content from Freevee, Amazon’s free ad-supported video service.
Separately, the ecommerce giant is having discussions with Warner Bros. Discovery and Paramount Global about adding the ad-based tiers of their streaming services through Prime Video Channels, according to people familiar with the situation. Through Prime Video Channels, users can sign up for streaming services—including the ad-free versions of Max and Paramount+—and view through the app.
Representatives for Amazon, Paramount and Warner Bros. Discovery declined to comment.
Amazon is discussing a variety of ways it could introduce ads in Prime Video, people familiar with the matter said. One option would be to bring more advertising to existing Prime subscribers and give them an option to pay more for an ad-free alternative and other features, some of the people said. The company is planning for the ad breaks to be short, they said.
That kind of upselling is an approach Amazon has taken recently with its Amazon Music offering: It gave Prime members access to more songs at no additional cost, but took away the option to get most songs on demand unless users opt for a pricier upgrade.
Amazon hasn’t firmed up its plans, and could decide not to move forward with an ad tier, the people said.
Creating an ad tier would help Amazon cover the costs of creating its shows and movies, as Chief Executive Andy Jassy has been increasingly focused on profitability of its different businesses. Chief Financial Officer Brian Olsavsky in February said Amazon spent about $7 billion last year on Amazon originals, live sports programming and licensed third-party video content included with Prime.
Jassy’s predecessor, founder and former CEO Jeff Bezos, was more focused on growing the video entertainment service than making it profitable, once reportedly saying, “I want my Game of Thrones," after the HBO success series.
In 2017, he sanctioned Amazon to pay a staggering $250 million for the rights to create a new “Lord of the Rings" series. The eight-episode series, “The Lord of the Rings: The Rings of Power," ended up costing $715 million for the first season, including the rights agreement, making it one of the most expensive shows ever. The show was met with mixed reviews.
Jassy has told people internally that he sees the value of entertainment and particularly live sports, according to people familiar with the matter, but also has been spending a lot of time reviewing the company’s unprofitable divisions.
Meanwhile, Amazon is discussing bidding for the rights to stream National Basketball Association games, whose rights come up for renewal in 2025, the people said, adding that launching a Prime Video ad-supported tier could help pay for those rights.
