Amazon may launch ads on Prime Video

Amazon is reportedly planning to launch ads on its Prime Video streaming service. The move, which would see the introduction of short commercial breaks, has been in discussion for weeks, the Wall Street Journal reported.

Amazon has not officially confirmed the news, but industry insiders have said that Prime subscribers would have the option to pay extra for ad-free shows and films if plans do go ahead.

Why we care: Both Netflix and Disney launched ad tiers to their streaming services last year. Netflix’s ad tier already has nearly 5 million monthly active users. Meanwhile, Disney expects up to 70% of subscribers to switch to its ad-supported tier.

If Amazon follows in its rivals’ footsteps, it would create huge opportunities for digital marketers to team up with the third fastest-growing ad business in the U.S., having made $9.5 billion in the first quarter of 2023 (a year-on-year increase of 21%). Currently, the company sells the majority of ads to retailers looking to promote products on Amazon’s search results. But more doors could open for premium advertising if plans go ahead.

Why the change? An increasing number of streaming giants have been introducing ad-supported tiers to increase revenue and grow subscribers, such as HBO’s Max and NBCUniversal’s Peacock.

Amazon has been exploring new ways to boost revenue after the company made tens of thousands of layoffs, which impacted its ad division in April. It was the largest number of layoffs in the business’ 29-year history following a recruitment surge during the COVID pandemic.

The company is now shifting its focus on investing in new original shows, concerts and live sports, which premium advertising can be sold around.  

What has Amazon said? Amazon has reportedly been in discussions about Prime Video ad tiers with Warner Bros, Discovery and Paramount Global. However, as talks are believed to be in the very early stages, representatives from all three brands have refused to comment just yet.

However, in April, Amazon CEO Andy Jassy hinted at the huge potential he sees in ads, despite the recent layoffs. He said:  “Even in difficult economies, most people still shop and with the largest e-commerce shopping venue, we have a lot of customers that companies seek to reach.”

How else will things change for advertisers? In addition to creating more advertising opportunities on Prime Video, Amazon has confirmed that it is working on giving digital marketers the tools to create AI images and videos in ad campaigns. This could significantly help boost listings and sales. However, a timeline is yet to be confirmed.