Amazon Prime Video could make billions if it adds commercials next year

Wondering why Amazon is rolling out ads on its Prime Video service? One analyst can offer at least 3 billion reasons.

Amazon stands to generate a large amount of revenue based on the number of ads it decides to play. In an interview with Yahoo!, Lloyd Walmsley, a UBS Internet analyst in the finance department, conservatively predicted that Amazon’s revenue could “could increase by $3 billion.” This is the case when on Prime Video he sees no more than 3 minutes of ads per hour.

Amazon is the latest company to enter the lucrative world of media advertising, which other streaming services already offer. But instead of lower tiers with ads, Amazon is adding commercials for everyone (unless you pay to go ad-free). This is because it’s already included in your Prime subscription.

The result could be an unpleasant change for subscribers who are used to shows like: jack ryan or Reacher You can watch without commercials.

Walmsley said Amazon could generate up to $6 billion in ad revenue by airing a six-minute ad, which is still 10 minutes shorter than a TV broadcast.

“In many cases Amazon is already paying for the content, so the incremental profits from this are likely to be quite high,” Walmsley said. “They either own it outright or have a license to basically offer it to their Prime users. So once the ads start showing and they start generating ad revenue, it’s a huge additional cost. I’m not thinking about it.”

Wedbush analyst Scott Devitt offered a different estimate of Amazon’s potential revenue growth.

“We believe the impact of our global expansion will be in the range of $6.6 billion to $8 billion of incremental revenue,” David said. “The ad-free offering equates to an approximately 20% increase in Amazon Prime’s monthly price in the U.S., or a 26% increase in its annual fee.”

Amazon said it aims to show “significantly fewer ads than linear TV and other streaming TV providers,” but declined to provide estimates. Prime members in the US, UK, Germany and Canada will see ads in early 2024, while France, Italy, Spain, Mexico and Australia will see ads late next year.

Amazon Prime membership prices won’t increase next year, but U.S. accounts can opt out of the ad experience for an additional $2.99 ​​per month. The ad-free add-on will be expanded to other countries, but Amazon did not comment on when that might happen.

Amazon will send you a notification with instructions on how to sign up for ad-free slots before ads start interrupting your video.