Amazon is poised to launch ads on its Prime Video streaming service in the US, marking a significant move that analysts believe will disrupt the evolving media landscape. Subscribers will be defaulted to the ad-supported tier, with an option to upgrade to an ad-free version for an additional $3 per month. With approximately 96 million US Prime households, Amazon aims to challenge traditional advertising video on demand (AVOD) players, connected TV platforms, and non-top 20 linear cable networks.
According to MoffettNathanson, Prime Video’s active US subscriber base is comparable to Netflix’s 70 million, estimating a surge in video ad revenue to $1.3 billion in 2024 and $2.3 billion in 2025. The firm predicts Amazon and Disney will lead AVOD ad revenue, projecting a $16 billion market by 2025.
After its US debut, the ad tier will expand globally, starting in the UK and Germany on Feb. 5, followed by France, Italy, Spain, Mexico, and Australia later in the year. Amazon assures a more streamlined ad experience compared to linear TV and other streaming providers.
Ad buyers can expect a cost-per-thousand (CPM) rate between $30 to $35, potentially influencing pricing dynamics. This contrasts with Netflix and Disney, which initially sought higher CPM rates but adjusted due to advertiser feedback.
Amazon’s decision to default users to the ad-supported tier diverges from competitors like Netflix, reflecting a strategic approach. Despite concerns voiced by Netflix’s co-CEO, Greg Peters, about introducing ads, Amazon’s broad audience reach and consumer data could accelerate retail media spending and impact the industry significantly.
Macquarie analyst Tim Nollen anticipates Amazon’s entry will catalyze a shift from linear to streaming for ad buyers, further challenging legacy media as the cable bundle faces ongoing challenges. The move raises stakes, fostering competition for ad inventory and driving the industry towards enhanced targeting and programmatic advertising.
