Jun 7, 2023 - Technology

Amazon plans to add an ad-supported tier to Prime Video

illustration of the Amazon Prime Vieo app

Photo by Katja Knupper/Die Fotowerft/DeFodi Images via Getty Images

Amazon's leadership last week green-lit a plan to create an ad-supported tier for its Prime Video service, a source confirmed to Axios.

Why it matters: An ad-supported tier will help the company bolster its ad business at a time when more dollars are shifting from linear television to streaming. It could also help lure more subscribers to its video service.

  • The Wall Street Journal first reported about the effort.

Be smart: The move comes weeks ahead of the annual Cannes Lions creative festival each year, which brings together the world's biggest advertising and publishers to discuss deals and new products.

  • Amazon has a major execution planned for this year, with an entire port rented out to host conversations and events with thought leaders in the industry.

State of play: It's unclear when an ad-supported tier would roll out. But unlike rival Netflix, which just launched its own last year, Amazon already has a well-established advertising team and advertising video products that can help inform its efforts.

  • Ads are already present on Prime Video, and it's unclear exactly how the experience for a separate tier will be constructed to differentiate itself from current offerings.
  • Prime Video subscribers also get access to Freevee, a free, ad-supported video product owned by Amazon.

Zoom out: More streamers are adding ad-supported tiers to their products in an effort to bolster revenue and grow subscriber bases.

  • Like Netflix, Disney also launched an ad-supported version of its streaming platform, Disney+, last year.
  • HBO Max debuted the option for streaming customers in 2021 and NBCUniversal's Peacock introduced its tiers when it launched in 2020.

The big picture: Amazon has the fastest-growing ad business in the world, per Insider Intelligence. Right now, Amazon mostly sells ads to retailers looking to boost their products in Amazon's search results.

  • But the company has invested more in new programming, including original shows and live concerts, that it can sell more premium advertising around.

What they're saying: The company is still "very early" in its efforts to place ads in video, live sports, audio and grocery, CEO Andy Jassy told analysts during a recent earnings call.

  • "We have a lot of upsides still in advertising."
  • “We don’t comment on rumors or speculation,” an Amazon spokesperson told Axios in a statement.

By the numbers: Amazon is already expected to take nearly 40% of new search ad dollars this year, according to Insider Intelligence.

  • Its ad unit also continues to grow at about 23% year-over-year, as Meta's ad growth slowed to 4%; meanwhile, Google's shrunk in the first quarter.

What to watch: Netflix recently touted early success of its ad-tier, revealing that it drew nearly 5 million monthly active users to its service within the first 200 days of launch.

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