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Amazon will become the latest tech giant to introduce advertising on its streaming services in countries such as the US and UK in a bid to boost revenue to invest more in content.
The move will test the appetite of its members, who already pay a monthly fee, to accept the intrusion of advertising for the first time as they watch programmes.
In a blog post on Friday, Amazon said Prime Video content will include “limited” adverts from early next year to enable it to continue investing in TV content and increase investment “over a long period of time”.
Amazon added that it aimed to have “meaningfully fewer ads than linear TV and other streaming TV providers”. Customers in the US will be able to pay an extra $2.99 per month for an ad-free option; pricing for other countries have yet to be released.
Advertising across Prime Video content will be introduced in the US, UK, Germany and Canada in early 2024, followed by France, Italy, Spain, Mexico, and Australia later in the year.
Large US streaming services have come under pressure from investors to curtail the profligate spending on TV and film content that was deemed necessary in the race for subscriber growth.
Amazon’s Lord of the Rings spin-off, The Rings of Power, was reported to have been one of the most expensive TV shows to have ever been made on a cost per episode basis.
But streaming services have suffered a slowdown in subscriber numbers in key markets given the cost of living crisis facing many consumers, and increased competition from the swath of rivals.
As a result, streaming services such as Netflix, Disney, Paramount and Warner Bros Discovery have been pushing up prices to stem losses and boost profitability.
Amazon said on Friday that it would not increase the cost of its Prime subscriptions in 2024.
Many, such as Netflix, have also introduced advertising in the past year on lower-priced tiers to create new revenue streams and offer households cheaper, entry level services.
Bob Iger, Disney chief executive, said this summer that its ad-supported service, which cost $7.99 per month, had signed up 3.3mn subscribers. Senior advertising executives also expect Apple to introduce layers of advertising against its services.
Netflix’s ad-supported service was initially seen to have started slowly by analysts after its launch last year, but ad industry executives say that the group now makes more money per user on its advertising plans than in the standard tier.
In May, Netflix said its ad-supported plan had nearly 5mn monthly active users globally after six months.
However, Spencer Neumann, chief financial officer at Netflix, said in July that the revenues were only growing gradually and were “not expected to be a big contributor this year”. He added that it has been “nice growth but still off a small base”.
Prime Video offers video content including The Boys, Citadel, Reacher and Clarkson’s Farm, as well as some Premier League Football games in the UK.
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