The power of Amazon Prime can hardly be overestimated. Prime not only changes the shopping behavior of subscribers and allows Amazon to cross-subsidize businesses it also allows Amazon to compete asymmetrically in many different markets.
Operating a unique cross-category bundle that popular gives Amazon an immense advantage in so many markets.
Industry analyst Jan Dawson points out several often overlooked aspects of the Amazon Prime bundle in this Techpinions post:
Media recently reported that Amazon now has the number three position in streaming music behind Spotify and Apple Music globally, through a combination of the limited Prime Music service and its separate Music Unlimited service. My own recent surveys suggest roughly one in six Prime subscribers in the US use the music feature at least monthly, and I would bet that Echo adoption plays a role in that, given that Prime Music is integrated into the Alexa function.
Amazon adds a bare-bones music streaming service to Amazon Prime which has a tenth of the catalogue Spotify and Amazon‘s own Music Unlimited and other services offer. That only makes sense as an add-on. Given the size of Amazon Prime that still gives Amazon an edge with music.
More interesting is the video side of things. Besides Amazon‘s own video streaming service, Prime has become a way to sell other video streaming services on top:
But the more interesting part of its recent video strategy has been its creation of the Amazon Channels service, which allows Prime subscribers to bolt on monthly subscriptions to various channels, from premium networks like HBO and Showtime to niche and foreign content. Recent figures reported by BTIG Research suggest that Amazon alone may be responsible for a significant chunk of the subscribers for standalone streaming services like HBO Now through this channel.
The limited audience at Amazon Prime allows Amazon to negotiate different partnership deals for this.
Beyond those, Prime subscribers get services like unlimited photo storage. This sounds like a nice add-on but it adds up:
Though video and music are the most popular features beyond free shipping, others such as the free access to books and magazines through Prime Reading and the Photo Storage offerings are also used by 10% or more of Prime subscribers in the US. Applied to the likely 80 million plus subscribers Amazon now has globally, that means Amazon is becoming a meaningful player in a number of secondary markets almost incidentally, threatening standalone players who make their whole businesses out of providing similar offerings.
Strategically, something like photo storage can be the starting point to build social networking services like messaging:
Though it would be tempting to write Amazon off as having no basis on which to build either of these businesses – after all, it’s historically served households rather than providing personalized services to individuals – the businesses it’s built in video, music, and beyond suggest that we should never underestimate Amazon to build new businesses off the back of its Prime subscription base.
This is why I have been argueing for a while now that Amazon should be pushing family plans and family-based services far more aggressively. Amazon is better suited than anyone else to build a strong family network business that would have an almost impregnable moat around it. (Amazon clearly wants to own the home with its Alexa platform. Owning the home and owning the family do sound eerily close to each other, don‘t they.)
Amazon Prime has laid the groundwork for this already.
- A Prime Bundle
- From Echo to Prime, How Amazon Incorporated Music Streaming Into Its Bundled Universe
- CIRP Study: U.S. Amazon Prime Membership at 85 Million, +35% YoY
- Alibaba’s Lazada Launches the First Real Amazon Prime Competitor With LiveUp
- Splitting the Amazon Prime Revenues Up Into Their Individual Parts
- What This Journalist’s Tale of Switching From Amazon Prime to Jet.com Really Tells Us
- Walmart Still Doesn’t Understand Amazon Prime, Kills ShippingPass Without Substitute
- Mobile App Strategies of Online Retailers, Pt. 1: Amazon’s Breathtaking App Armada