Amazon eyes ad-supported Prime Video tier in bid to boost streaming revenues

The news: Amazon Prime Video is considering launching an ad-supported tier, according to The Wall Street Journal, which would make it the latest major streamer to cave to the trend.

• The company is in the early stages of discussions about the format of a forthcoming ad-supported Prime Video tier, with pricing and launch date yet to be determined.
• Amazon is reportedly considering this ad-supported tier as part of an industrywide move to boost revenue. By introducing a more affordable subscription option that includes advertisements, Amazon aims to expand its subscriber base and strengthen its position against competitors.

Ad-supported plans are gaining traction in streaming for their potential to enhance average revenues per user. Notably, even Netflix, once staunchly against ads, has adopted this model with apparent success.

Ad empire expansion: While retail media has long become an Amazon core competency, it’s quietly began to build its ad-supported streaming bona fides.

• The tech giant has already dipped its toes into ad-supported content with the May introduction of Fire TV Channels, which offer free content on Fire TV devices, bolstered by ads. It also has the ad-supported Freevee service, which last month announced it would begin offering some original Prime Video content.
• Amazon is rumored to be in talks with major studios such as Warner Bros. Discovery (WBD) and Paramount to incorporate their ad-supported subscriptions into Prime Video Channels.
• Prime Video already includes advertisements in a few key areas, like NFL Thursday Night Football broadcasts, and through a virtual product placement program that integrates ads directly into content.

How it may work: One possibility is that Amazon would show more ads to existing Prime subscribers, alongside a promotion for an ad-free subscription tier. Another would involve possibly receiving a cut of revenues from other streamers’ ad-supported subscription tiers.

• While format and pricing are still uncertain, one thing is clear: Ad breaks will be short. WBD’s Max and Netflix also have short ad loads of 3 to 4 minutes of ads per hour.

Our take: It may be some time before an ad-supported video-on-demand (AVOD) tier makes its way to Prime Video, but it’s clear that the company—and streaming industry as a whole—are determined to move in that direction.

However, Amazon may be an advertising giant, but its NFL missteps (more on those tomorrow) show it has a long way to go to build out a strategy and system to bring ads to its streaming service.