On Jan. 29, Amazon will turn on ads for all of its Prime Video viewers:
Users will have the option to pay $3 a month to remove the ads, but as the executive quips: “Almost no one will do that, are you kidding me?”
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Amazon, run by Andy Jassy, has always been coy about just how many Prime subscribers it has (the last official number, in 2021, was “more than 200 million”), but no one disputes that its reach is almost unrivaled. Consumer Intelligence Research Partners estimates that there are about 168 million Prime subs in the U.S. alone, as of 2023.
If just half those subs watch Prime Video content, it would be comparable to Netflix’s penetration in the U.S. (77 million) and significantly more subs than the likes of Hulu, Peacock or Paramount+.
Data from Nielsen reinforces that: While Netflix and YouTube take up the lion’s share of viewing time, Prime Video is extremely competitive. The latest Nielsen Gauge reported that 3.4 percent of TV viewing in November was Prime Video, compared to 2.7 percent for Hulu, 7.4 percent for Netflix and 9 percent for YouTube.
The Gauge certainly suggests that if Hulu has just shy of 50 million subscribers, as Disney has reported, then Amazon is at least in the same ballpark in terms of Prime subs that watch video content.
Most Netflix users, however, are not subscribing to the ad tier (the company said in November it had only 15 million “active users” of the tier), while some Hulu subcribers also opt out of ads.
That scale, in both subscriber reach and real viewership, has analysts thinking that Amazon will be able to quickly scoop up billions of ad dollars. Bank of America’s Justin Post estimated in a Jan. 3 note that the company will ultimately generate $3 billion in new ad revenue from the switch, and nearly $5 billion when accounting for users who opt to pay not to see ads. LightShed’s Rich Greenfield estimates that the company will hit $2 billion in ad revenue this year. Both analysts assume that the overwhelming majority of users will opt not to pay extra to remove the ads.
Kevin Krim, CEO of the ad measurement firm EDO, estimates that Amazon could see a CPM (the cost per thousand consumers who see an ad) of about $50, below what Netflix sought when it got into advertising a little over a year ago, but still “a big premium to linear TV.”