Balancing Profitability And Entertainment: Amazon Considers Launching Ad-Supported Prime Video Tier

 (Photo by Artur Widak/NurPhoto via Getty Images)

Amazon.Com, Inc (NASDAQ: AMZN) looks to launch an advertising-supported Prime Video streaming service tier to build its ad business further and generate more entertainment revenue.

Advertising has been an area of continued growth for Amazon, growing by 21% year over year to $9.5 billion in the first quarter, the Wall Street Journal reports.

(L-R) Vice President of Amazon Video, Albert Cheng, Vice President of Media and Entertaiment, Cory Shields, Head of Marketing of Amazon Studios, Sue Kroll, Head of Movies, Julie Rapaport, Sarah Schechter, David Dawson, Head of Amazon Studios, Jennifer Salke, Harry Styles, Robbie Rogers, and Bethan Roberts attend the Los Angeles premiere of “My Policeman” at Regency Bruin Theatre on November 01, 2022 in Los Angeles, California. Kevin Winter/Getty Images

It is the third-biggest player in terms of digital ad revenue in the U.S. after Alphabet Inc (NASDAQ: GOOG)  Google and Meta Platforms Inc (NASDAQ: META), according to Insider Intelligence. 

Advertisers expressed interest in Amazon offering an ad tier for Prime Video service, likely to inspire other streaming platforms, including Netflix, Inc (NASDAQ: NFLX) and Walt Disney Co (NYSE: DIS). Specifically, ad buyers claimed more access to premium movies and programs that have mainly remained ad-free. 

Amazon has been attempting to bring more ad-supported programming to Prime Video.

Separately, Amazon is discussing with Warner Bros. Discovery, Inc (NASDAQ: WBD) and Paramount Global (NASDAQ: PARA) about adding the ad-based tiers of their streaming services through Prime Video Channels. 

Through Prime Video Channels, users can subscribe to streaming services, including the ad-free versions of Max and Paramount+, and view through the app.

Amazon is weighing multiple ways of introducing ads in Prime Video, including bringing more advertising to existing Prime subscribers with an option to pay more for an ad-free alternative and other features. It is planning for shorter ad breaks.

Creating an ad tier would help Amazon cover the costs of producing its shows and movies, considering CEO Andy Jassy’s growing focus on profitability.

 

Amazon CEO Andy Jassy speaks during the New York Times DealBook Summit in the Appel Room at the Jazz At Lincoln Center on November 30, 2022 in New York City. (Photo by Michael M. Santiago/Getty Images) 

Internally CEO Andy Jassy had expressed his faith in the value of entertainment, mainly live sports.

Meanwhile, Amazon is discussing bidding for the rights to stream National Basketball Association games and adding that launching a Prime Video ad-supported tier could help pay for those rights.

Price Action: AMZN shares closed lower by 4.25% at $121.23 on Wednesday.

Produced in association with Benzinga

Edited by Kyana Jeanin Rubinfeld and Rachmad Imam Tarecha