Amazon Considers Raising Price of Prime Membership

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Jan. 31 (Bloomberg) –- Garibaldi Capital Advisors Co-Founder Paul Kedrosky and Bloomberg’s Jon Erlichman discuss the impact this decision would have on customers and on the company’s bottom line with Emily Chang on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

Many, many things from amazon a day, this is a good deal.

But what about all of the other people out there?

Is amazon going to lose customers because of this?

No, because they have managed to wipe out the entire retail landscape, so there are no stores anymore.

There may be a couple out there.

I do not think they are.

It would be heartbreaking to me.

This is one of those essential utility services, in terms of my own family consumption, in terms of video and other purchases.

Nevertheless, it always struck me as strange that the price has sat flat since i think 2005, around the launch date, and has not changed despite increases in shipping costs and the enhancements that have made to the video service, the netflix- like service.

The only surprise is that it took so long.

I do not think it is going to change anything.

It will be a lot of noise.

But the appeal of the cash that comes with, say, 20 million subscribers, and you add $40 in additional subscription fees -- you are talking a billion dollars incremental revenue.

That is hard to turn down.

What impact could raising this price have on the bottom line, have on the business?

The explanation they gave was that this helps offset those shipping costs of moving everything around.

The amount of stuff you can buy on amazon today, versus when they first rolled out amazon prime.

My take away is, now we know why they need those darned drones, you know what i mean?

Something that is not going to cost you the same you pay to fill up the tank.

That is part of the story.

This is a potentially savvy move.

Drones, we know, are years down the line, it ever happened.

What are other things amazon can do to offset shipping costs?

People talk about them by ups, fedex, the postal service.

Realistically, what else can they do?

They are trying to move more logistics centers closer to the larger populations of people.

They have already done a lot of that, so they are not pushing things as far across the country as the early days.

That cuts down on some of their costs.

It does swap some fixed costs of storage and inventory for some variable costs of what they spend on shipping.

Nevertheless, they can adjust their cost structure a little bit that way.

I do not look for drones anytime in the near future, but it is at least interesting.

It shows they are trying other stuff.

I think an increasing amount of the value people see in amazon will be services.

There are services that are not part of prime, but amazon prime is a creditable competitor with netflix.

The shipping is free, and i would have to pay for prime, or the other way around.

You are getting something for a low price, compared to netflix.

It is a pretty incredible bundle.

What about the video service?

They could spin the unit off and make it a separate company.

They were asked about that yesterday and dodged the question, like all questions.

I think it is an important development.

Say they do it on the lower end so people do not freak out at a $40 increase.

$99 or $100. you could separately use the streaming video service for a comparable price to what netflix charges.

Maybe they go lower.

Potentially, you could get more people to join prime.

They say, you are using our video service for this much more per month.

You could come into the prime family.

There is a huge opportunity to take business away from netflix in a hurry, if they were to split it out like that.

This pricing change totally plays into the idea of netflix.

I am sure bezos has netflix and his sites, for sure.

What do you think of that idea?

I think that is exactly the direction they are going.

You are going to see some unbundling of services.

Amazon has traditionally gone after their top competitor will stop the bull's-eye is now on netflix.

The shots are going to start to come.

Thank you both.

This text has been automatically generated. It may not be 100% accurate.


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