Amazon has long been a place to buy books or even shoes and many were surprised when they moved away from individual sales of movies and TV shows to offering a subscription option to their members.
Last week at Vox’s Code Conference Amazon’s CEO Jeff Bezos said,
“We get to monetize [our] in a very unusual way,” Bezos said. “When we win a Golden Globe, it helps us sell more shoes. And it does that in a very direct way. Because if you look at Prime members, they buy more on Amazon than non-Prime members, and one of the reasons they do that is once they pay their annual fee, they’re looking around to see, ‘How can I get more value out of the program?’ And so they look across more categories—they shop more. A lot of their behaviors change in ways that are very attractive to us as a business. And the customers utilize more of our services.”
“Because we have this unusual way to monetize the premium content, we can charge less for the premium content than we would otherwise have to charge, if we didn’t have the flywheel spinning to help sell more shoes,” Bezos said.
Now this probably does not surprise many, but it does explain how Amazon is only charging $100 a year for free shipping, music, books, videos, and photo storage.
Now this leaves places such as Netflix and Hulu at a disadvantage. They need to make money off of their subscriptions forcing them into a much more difficult position in this fight for your streaming dollar.
So far Amazon seems to be very happy with their decision and the return on their investment into Amazon Prime Video.
Source: Business Insider
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