Amazon Raises ‘Prime’ Costs After Announcing Record Quarterly Profits

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Amazon surprised investors on Thursday by announcing that they’ve more than doubled their first quarter profits compared to what they pulled in the first quarter of 2017.

The experts expected Amazon to lose a bit of their momentum going into this year, which is why the announcement came as a shock.

In the first three months of 2018, the mega online retailer raked in $1.6 billion. This profit is on top of several expensive investments made into original programming for their streaming service and the building of more fulfillment centers across the country.

This isn’t the first major milestone Amazon has hit this year. It has also touted a record number of paying subscribers, the amount of cloud computing sales, and advertising sales, all of which helped spur on the $1.6 billion first-quarter profit.

Because of these breakthroughs, Amazon’s stock has been soaring, putting that iconic Amazon smile on the faces of every investor.

Price of Prime to Rise 20%

Despite the absurd profits made in the last quarter, Amazon also announced via letter that they will be raising the price of Prime, their extremely popular subscription service, from $99 to $119 per year, a 20% increase.

Their justification for the increase again has to do with the increased cost of making more original content and continuously adding more “digital benefits”.

With over 100 million Prime subscribers, Amazon felt the price needed to go up, and will continue to go up as they offer more benefits to their customers. Amazon remains on the front lines of innovation, offering shipping perks, and believes it can compete with the likes of Netflix and Hulu with their streaming services.

Amazon CFO Brian Olsavsky said in a conference call on Thursday, “We continue to increase the value of Prime by adding digital benefits.”

With this news, the price of Amazon’s stocks jumped 7%. While investors are happy, one can’t help but wonder what the subscribers think of the price change. The company has record-high profits, but feels the need to increase the price of Prime by 20%?

There will be a breaking point for subscribers. If they keep raising the cost, it can become too costly and not worth the price to the average consumer.

Time will tell if this price increase will impact the number of subscribers Prime receives (or loses) in the future.

Last modified: April 27, 2018