Being an Amazon Prime member conveys all sorts of benefits, includingfree movie and TV show streaming, the Kindle lending library, and special sales offers. At its core, however, Prime is about paying $79 per year for free and reduced-price shipping. But that may be about to change.
Amazon says it is considering bumping up the price for Prime, blaming the price hike on rising transportation costs and higher usage from Prime members.
"With the increased cost of fuel and transportation as well as the increased usage among Prime members, we're considering increasing the price of Prime between $20 to $40 [per year] in the U.S.," said Amazon CFO Tom Szkutak during the company's fourth quarter earnings call on Thursday.
Amazon won't say how many members would be affected by the price hike, but a sizable portion of the company's tens of millions of Prime members are likely in the U.S.
During the call, Amazon acknowledged that Prime benefits like video streaming were also a big cost, but Hollywood royalties weren't the main driver for the Amazon price hike.
The big question is whether Amazon Prime members are too price sensitive to bear the cost of a potential price hike. Prime fans may be able to stand a $20 increase keeping Prime's cost under $100, but $120 per year could be pushing it--especially when you consider that the potential Prime price hike follows a similar price bump in October from a minimum spend of $25 to $35 for free shipping.
Send in the drones?
If transportation costs are getting too expensive for Amazon's Prime service that may shed some light on why the company wants to experiment with electric-powered drone deliveries via Prime Air. However, there is some doubt as to whether Amazon's futuristic program could serve even a tiny fraction of its U.S. customers. It's also not clear what kind of maintenance costs a sizable drone fleet would require. Amazon says the program could be ready to go as early as 2015 pending regulatory approval from the Federal Aviation Administration.
If Amazon can bump up the value of a Prime membership with benefits like 30-minute drone deliveries for all, perhaps the company can keep Prime members coming back for more even with a higher base cost. I guess we'll just have to wait and see what--if anything--happens.