*New York (CNN) — Amazon Prime members today may notice something looks a little different when they watch Prime Video: They’ll have to watch ads unless they want to pay a little extra.
Starting today (01-29-24), Prime Video will feature “limited” advertisements in its shows and movies. Customers will have to pay $2.99 a month more to avoid ads. Amazon first announced the change in September.
“This will allow us to continue investing in compelling content and keep increasing that investment over a long period,” Amazon said in an email to Prime members in December. “We aim to have meaningfully fewer ads than linear TV and other streaming TV providers.”
Amazon is hardly alone in making the change. Prime Video joins most other streaming services by inserting ads into its programming and raising prices on ad-free tiers.
That’s because streaming services are no longer chasing subscribers. Still, rather investors are pressuring them to make money off the services, even if it comes at the expense of losing subscriptions. As a result, they are selling ads or hiking monthly prices.
Netflix in October said its premium ad-free plan in the United States will increase by $3 per month, to $22.99. Its one-stream basic plan rose to $11.99 in the United States; that plan is grandfathered in and is no longer available for new or rejoining members. All other plans, including its entry-level, $6.99-a-month ad-supported tier, remained at the same monthly cost.
In August, Disney+ increased prices for the second time in less than a year, with the monthly cost of its ad-free plan rising to $13.99 in October — a $3 increase. In which Disney owns a majority stake, Hulu will also hike its monthly ad-free subscription from $3 to $17.99.
Max, owned by CNN’s parent company Warner Bros. Discovery, raised prices in January 2023 by $1 a month — its first-ever price hike. And Peacock, owned by NBCUniversal, also had its first-ever price hike in July.
The price hikes come as streaming companies search for additional revenue. Consumer demand for streaming services has slowed dramatically since the pandemic, cutting into streamers’ revenue growth.
Meanwhile, the cost of producing shows has risen, and it will continue to go up as the actors’ and writers’ new negotiated contracts kick in. Raising prices is one way to solve streaming companies’ financial issues.
When Amazon first announced the change in September, it explained that ads would help it continue to produce popular programs, such as “Thursday Night Football.” Spending on Amazon’s content, which includes its original series, soared nearly 30% in 2022 to $16.6 billion.
A recent Morgan Stanley report predicts that ads on Prime Video will generate more than $3 billion in additional revenue this year, soaring up to $7 billion in 2026.
The company didn’t reveal how long the ad breaks will be. Prime Video, which is home to the new Nicole Kidman series “Expats” and “Citadel,” is included in the $139 yearly Prime subscription.
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