Amazon's 'Prime' service, a premium service costing $79 annually which offers free two-day shipping and unlimited movie streaming, has reportedly hit 10 million subscribers.
Morningstar analyst R.J.Hottovy reports via a video that the service currently holds over 10m users, accounting for a third of Amazon's total operating income. The data was interpreted by Morningstar from a Consumer Intelligence Research Partners (CIRP) survey conducted in November 2012.
From Amazon's perspective, Prime members are their most valued customers, spending double the amount normal customers do ($1,224 yearly compared to $505). In 2012, whilst Prime members accounted for only 4% of the company's 182 million-strong user base, they made 10% of total purchases.
Hottovy calculates that Amazon makes around $78 per Prime customer, a margin that makes the service almost pure profit for the company. Huge margins such as this would usually bring about much joy with shareholders, but Jeff Bezos, Amazon's CEO, has in the past reinvested the company's profits directly into product development and decreasing the cost of products for consumers. The Kindle, for example, sells for a mere $69. Bezos confirmed in 2012 that Amazon makes no profit through hardware sales of Kindles, instead turning to online content sales to draw a profit.
Via: Business Insider | Source: Morningstar | Image: Amazon
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