CIRP: Amazon Prime membership is expected to reach 50 million in 2016, with annual revenue of $5 billion

After 11 years of development, Amazon's Prime membership service has become an important business. According to analysts' forecasts at the beginning of this year, after the Christmas shopping season, the number of Prime members will reach 50 million, and the annual fee revenue will reach 5 billion US dollars.

In addition to the number of subscribers becoming quite large, a study from the Chicago-based investment institution Consumer Intelligence Research (CIRP) shows that the longer users use Prime membership services, the more willing they seem to be to renew their subscriptions, which means that the longer they use Prime membership services, the higher their retention rate. This is good news for Amazon.

The report surveyed 2,108 Amazon users in the United States who are currently or have used Prime membership services. CIRP updates the renewal rate of their Prime membership services every three months.

The survey found that in the two years after the second quarter of 2014, the proportion of users who had subscribed to Prime for two years and renewed for a third year increased to 96%. In contrast, the renewal rate of users who subscribed to Prime for one year only increased to 91%, while the renewal rate of users who used the 30-day free trial decreased to 73%.

During the CIRP investigation, Amazon made a number of adjustments to its Prime service, such as raising the annual fee from $79 to $99 in March 2014, and expanding the services provided to Prime members from the initial two-day delivery service to original TV series, free e-books and more.

Josh Lowitz, co-founder of CIRP, concluded: “Once Amazon Prime members renew for a second year, Amazon appears to have long-term appeal to them.”

Prime Membership Expansion

2005.2

Prime membership is launched, a two-day delivery service with an annual fee of $79

2011.2

Added Prime Instant Video service, providing online movies and TV series from multiple video companies

2011.11

Add free Kindle e-book rentals

2014.6

Added Prime Music service, providing streaming music service. The annual membership fee increased from $79 to $99 in March.

2014.11

Added Prime Photos, providing online photo storage

2015.12

Added Streaming Partners Program, a cooperative project with TV channels, to provide TV channel subscription services on TV boxes, requiring additional subscription fees

For Amazon, when the Prime membership service was launched in 2005, it was just a "subsidized" program for two-day delivery, but Prime members began to place more orders thanks to the faster delivery service. Amazon CEO Jeff Bezos also talked about the logic behind the Prime membership business, saying that one reason Prime users do this is to maximize the value of their annual fee.

However, Prime, which has added more digital content, has become a very important product for Amazon. The Prime membership service hopes that users will expand their shopping to consume more digital content, which has also led Amazon to spend more money to invest in more content, and even go deep into the video industry chain to distribute movies, sign program hosts and directors, and launch self-made content.

Bezos said in an internal email in April this year that Amazon's third-party trading platform Marketplace, Prime membership service and AWS cloud computing service have become the three pillars of Amazon.