Amazon is reportedly in the early stages of creating an ad-supported tier for its Prime Video streaming service.
Advertisers have expressed eagerness for Amazon to offer an ad tier for the Prime Video service, The Wall Street Journal reported, citing people familiar with the matter.
They want to have more access to premium content that is largely ad-free and includes programs that often receive the most attention.
Prime Video includes original shows like “The Marvelous Mrs. Maisel,” a large collection of movies, and live sports offerings such as the NFL’s “Thursday Night Football” games.
Notably, the company has recently taken steps to obtain more ad-supported programming on its platform.
Sports coverage on Prime Video has included commercials and some other shows feature product placement advertising. Additionally, Prime Video users have access to content from Freevee, Amazon’s ad-supported video-on-demand streaming service.
— Evan (@StockMKTNewz) June 7, 2023
How Would Amazon’s Ad-Supported Tier Look Like?
Amazon is reportedly considering a variety of options for adding advertisements to Prime Video, including providing additional advertising to existing Prime subscribers and offering them the option to pay more for an ad-free subscription.
By creating an ad tier, Amazon aims to cover the costs of creating its own original programming and movies, which cost around $7 billion in 2022 alone.
One potential benefit of creating an ad-supported tier for Prime Video is that it could enable Amazon to bid for the rights to stream NBA games when they come up for renewal in 2025, as the advertising revenue would be able to cover some of the costs.
In addition to focusing on its own ad-based content, Amazon is reportedly in talks with Warner Bros, Discovery, and Paramount Global to include their ad-based tiers through Prime Video Channels, which allows users to add extra streaming networks and services to their Prime Video membership.
The move to bring more advertising comes as advertising-supported programming has been an area of growth for the company, with ad revenue reaching $9.5 billion in the first quarter of this year.
Amazon is currently the third-largest player in terms of digital ad revenue in the US, following companies like Google and Meta.
Ad-Supported Tiers Set to Overtake Subscription-Based Services
As reported, ad-supported video-on-demand (AVOD) platforms are expected to gain 13.3 million US viewers, including 4.3 million from free premium platforms, this year, bringing their total to 157.1 million.
In contrast, subscription over-the-top (OTT) services will gain just 4.3 million viewers to reach 222.2 million.
“AVOD is the one to watch as streaming services focus on profitability through new ad plans, which are paying off for Netflix, and new ad formats, like those of the newly rebranded Max,” a report by market research firm eMarketer said.
Netflix has been among the early streaming companies to introduce cheaper, ad-supported tiers to attract customers and offset losses.
Last month, the company disclosed that its ad-supported streaming tier, launched last November, has reached nearly five million monthly active users.
Neftflix’s basic ad-supported plan is currently priced at $7 per month and represents a reduced-cost alternative to Netflix’s standard offerings that start at $10 per month.
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