Dive Brief:
- Amazon is in early discussions to launch an ad-supported tier of its Prime Video streaming service, people familiar with the situation told The Wall Street Journal.
- The tech giant could decide not to move forward with the ad service, but if it does, ads could take a variety of forms, including bringing more advertising to existing Prime subscribers but providing an option to pay more for an ad-free service. Ad breaks would be short, per the report.
- The possible introduction of an ad-supported tier on Prime Video follows similar moves by competing streaming services and comes as Amazon is looking for additional revenue amid wider cost-cutting and layoffs.
Dive Insight:
Amazon reportedly mulling an ad-supported tier of Prime Video could be a logical next step as the firm looks to generate more revenue from advertising. The move would also align with how the broader streaming landscape has shifted. Formerly ad-free streamers including Netflix and Disney+ have recently introduced ad-supported tiers as subscriber growth has slowed, making Prime Video one of the last mostly ad-free holdouts in the space.
The addition of advertising to Prime Video, which already features product placement and service-focused pre-roll ads, would help Amazon as it continues to shore up its advertising capabilities and market share. The company's ad revenue grew 23% year-over-year in the first quarter of 2023 for a total of $9.5 billion. The addition could also help cover the cost of Amazon’s content expenses: The company spent $16.6 billion on content in 2022, with approximately $7 billion spent on Amazon originals, live sports and licensed third-party video content included with Prime, CFO Brian Olsavsky said on a previous earnings call.
Amazon is not starting from scratch with ad-supported video: The company already operates Freevee, formerly known as IMDb TV, and has worked to boost the platform with Amazon Original content and new ad formats, like an interactive pause ad format that it revealed at the NewFronts. Bringing ads into Prime Video would build on those previous moves, Insider Intelligence principal analyst Ross Benes explained in emailed comments.
“The Fire TV interface makes virtually no distinction between shows on ad-free Prime Video and those on ad-supported Freevee. Much of Amazon’s library has also been moved over to Freevee,” Benes said. “In recent years, Prime Video has gotten more aggressive about running promos prior to its shows and including ad-filled sports broadcasts. Given these developments, putting midroll and pre-roll in Prime Video programs isn’t that big of a step.”
Expanding advertising on Prime Video could also play into some of the firm’s biggest streaming bets. “Thursday Night Football” broadcasts have included ads that performed well, according to TV outcomes company EDO. Ads aired during the platform’s inaugural season carrying the program were 116% more effective than the primetime average, per EDO data shared with Marketing Dive. For comparison's sake, an advertiser would need to air about 39 spots across primetime TV to generate as much engagement as one ad aired during “Thursday Night Football” last season, according to the company.
“[‘Thursday Night Football’] on Prime Video demonstrated that Amazon can deliver on excellent premium programming and great outcomes for advertisers,” said Kevin Krim, president and CEO of EDO, in emailed comments. “And they will know from that experience that brands advertising on Prime Video will expect a robust measurement framework that goes beyond traditional metrics like reach and frequency.”
"Ad-supported streamers are all learning it’s crucial for advertisers to generate the most value from their campaigns. The ones that are most successful are focused on driving large, engaged audiences that drive actions connected to business results for their advertisers,” Krim added.
