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Amazon Prime to overtake pay TV in the US

News, 11 July 2017
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NEW YORK: Almost 79 million American households now have an Amazon Prime membership, an increase of 13 million from the end of last year, a growth record that suggests it will soon overtake the 90 million who currently pay for satellite or cable TV.

This is according to an analysis of two separate datasets by the US online magazine Recode, which compared S&P Global Market Intelligence figures for TV with Morningstar's statistics on Amazon Prime.

Because Amazon does not disclose its membership numbers, Morningstar's estimates are based on an analysis of the company's cash-flow statement. However, with other estimates pegging membership as high as 85 million, and others as low as 60 million, Morningstar's figures offer a cautious estimate.

The current rate of Amazon Prime membership growth and the slight decline in pay TV subscribers suggest more US households will be members of the ecommerce giant's offering than pay TV viewers as soon as next year.

Yet the implication is not that Amazon's TV offering is necessarily more attractive. The fast delivery service that is part of the membership remains the main reason for subscribing.

While the figures can be read as a rejection of TV in favour of Prime, the importance of the service to the retail business is difficult to overstate: members spend more per year, shop more, and are less sensitive to price than non-members.

Over 80% of America's wealthiest households subscribe to Prime, meaning that the growth window in this segment is fast shrinking. As a result, the company began offering a 45% discount to US customers receiving government assistance, reducing monthly payments to $5.99 down from $10.99.

The pursuit of lower-income consumers follows the decision to allow monthly payments for those who would otherwise have resisted paying the $99.

Data sourced from Recode; additional content by WARC staff

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