New customers have little over a month to avail of the old rate, and the new rate will affect customers who renew their subscription after April 17. Amazon also increased the price of its Prime service for students to $49, whereas members of the Prime Fresh grocery delivery service will continue paying $299 a year.
This is the first increase in rates since the service was launched nine years ago. The service was started by CEO Jeff Bezos to draw in millions of customers with the promise of getting their purchases in two days. In the last few years, Amazon was willing to bear the cost of two-day nationwide shipping even as expenses continued to rise.
Amazon spokeswoman Julie Law said the price hike was justified given that the company did not increase the price for the last nine years “even as fuel and transportation costs have increased.”
“If you consider things like inflation and fuel costs, a Prime membership valued at $79 in 2005 would be worth more than $100 today,” Law said.
John Blackledge, an analyst at Cowen & Co., wrote that the increase in Prime membership fee will not affect membership numbers and will only generate an additional $60 million in revenue for the company.
“We expect continued growth of Prime members, despite the price increase,” he wrote in a note Thursday. “Purchases are habitual and are not impacted by seasonality for Prime members at this point.”
The fee boost isn't a surprise as Amazon said during a fourth quarter earnings call that it could raise the annual price by as much as $40. Amazon says it has millions of Prime customers but refuses to divulge exact numbers.