Amazon Prime Video will offer ads starting next year

Amazon (AMZN) said Friday that emissions and Prime Video movies will have limited ads starting in 2024, as the company looks to increase profitability and continue investing in the platform.

Takeaways

Amazon is introducing ads to Prime Video starting early next year, marking a shift from years of ad-free viewing.
An ad-free option will be priced at $2 $.99 per month, lower than ad rates. -free options from competing platforms Netflix, HBO Max, Disney+ and Paramount+.
Several rival streaming platforms, including Netflix and Disney+ have either raised prices or canceled their ad-free streaming packages in an effort to increase profitability.

Ads in Prime Video shows and movies will be introduced in the United States and several other countries starting early next year. Existing subscribers are not required to take any action, and Amazon said customers will receive an email several weeks before the change.

This is a move that could help boost Prime Video's profitability, as the company plans to introduce an ad-free viewing option priced at $2.99 per month, a rate lower than ad-free options on competing platforms Netflix (NFLX), HBO Max, Disney+ and Paramount+. For comparison, the standard ad-free packages of Netflix and Warner Bros.' HBO Max. Discovery (WBD) costs $15.49 and $15.99 per month, respectively.

With today's decision, Amazon joins other streaming services that have either raised prices or dropped their ad-free plans in an effort to increase revenue. Netflix canceled its $9.99 per month ad-free basic plan in July in the US and UK, aiming to attract more viewers to its ad-supported plan introduced in November of last year. This plan costs $6.99 per month and is now the cheapest option available to subscribers.

Last month, Disney (DIS), which operates Disney+ and Hulu, raised prices for ad-free versions of the two streaming platforms in a bid to increase profitability after losing millions of subscribers over the of the last quarter. Starting October 12, an ad-free Disney+ subscription will cost $13.99 per month, while the ad-supported option will remain unchanged at $7.99. An ad-supported offering for Disney+ will launch in Europe and Canada from November 1, following its successful launch in the United States

Platforms like Netflix or Prime Video risk losing customers if they raise prices excessively, but also face pressure to invest in new content, including original shows and films, to stay competitive. Introducing advertisements and gradually increasing prices can allow them to increase their profits.

Amazon shares jumped more than 1.5% in early trading at 11:30 a.m. ET Friday, but down almost 7% for the week. They are up over 50% so far this year.