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Amazon to raise Prime subscription fees by 20%

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E-commerce giant posts Q1 sales, profit gains

SEATTLE — Amazon.com Inc. said Thursday that it would raise the annual subscription fee for its Prime members in the U.S. to $119 from $99, an increase of 20%.

The announcement came as Amazon reported strong sales and earnings gains for the first quarter ended March 31.

“We continue to increase the value of Prime, including speed selection and digital entertainment options,” Amazon chief financial officer Brian Olsavsky told analysts during a conference call. “We’ve been expanding free same-day shipping and one-day options. And our two-day shipping is now available on over 100 million items, up from 20 million as recently as 2014. And we continue to add digital benefits like Prime Video.

“The value of Prime to customers has never been greater. And the cost is also high, as we pointed out especially with shipping options and digital benefits, we continue to see rises in costs. So effective May 11, we’re going to increase the price of our U.S. annual plan from $99 to $119 for new members. The new price will apply to renewals starting on June 16.”

Amazon reported that its net sales increased 43% to $51 billion in the first quarter, up from $35.7 billion in first quarter 2017. Excluding the $1.6 billion favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 39% versus the prior year period.

Much of the credit for Amazon’s increased profit is due to its online advertising and Amazon Web Services (AWS) businesses.

Olsavsky noted that advertising is “now a multibillion-dollar program and growing very quickly.”

The web services business has long been a profit generator for Amazon, and one that initially operated somewhat under the radar.

“AWS had the unusual advantage of a seven-year head start before facing like-minded competition, and the team has never slowed down,” Amazon founder and CEO Jeff Bezos. “As a result, the AWS services are by far the most evolved and most functionality-rich. AWS lets developers do more and be nimbler, and it continues to get even better every day. That’s why you’re seeing this remarkable acceleration in AWS growth, now for two quarters in a row.”

 


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