Amazon reportedly could realize nearly $5 billion in yearly revenue from its video advertising efforts.
Most of that money would come from the tech giant’s recent decision to add commercials to its Prime Video movies and TV shows, Bloomberg News reported Tuesday (Jan. 5), citing an analysis from Bank of America.
Amazon announced last week that it would insert ads into its streaming content beginning Jan. 29 for its users in North America, with other countries to follow. Consumers who want to watch movies and shows without ads will need to pay another $3 per month.
Those extra payments should generate around $1.8 billion for Amazon, the Bank of America analysis said, on top of the roughly $3 billion in video ads Amazon will sell. The report estimates that 70% of subscribers will choose to sit through commercials and avoid the extra fee.
The Bloomberg report notes that advertising makes up Amazon’s smallest source of revenue, but also the one that is growing the fastest. For the quarter that ended Sept. 30, ads — primarily search and display ads on its web store — generated $12.1 billion.
The report adds that Amazon views Prime Video as a prime place to increase ad sales and make money from its investment into content like NFL games and movies.
This is happening at a time when American consumers who have multiple subscriptions to streaming services like Amazon Prime are increasingly cutting back. A report Tuesday (Jan. 2) by The Wall Street Journal said that roughly a quarter of U.S. subscribers to major services like Netflix, Amazon and Disney have canceled at least three of them in the last two years.
To offset this loss in revenue, PYMNTS wrote last month, many streaming companies have embraced the addition of ads to their content.
“Netflix, for instance, launched its ad-supported tier last year, though the tier’s underperformance earlier this year caused the platform to expand, seek more or different ad partners, adjust prices and innovate placements,” that report said.
“Meanwhile, Warner Bros. Discovery’s Max streaming subscription has seen its shift to ad-supported models help drive revenue increases.”
Streamers are also adding shoppable video options to their programming, tapping into a desire felt by consumers, according to PYMNTS Intelligence research.
“How We Will Pay Report: How Connected Devices Enable Multitasking Among Digital-First Consumers,” which drew from a survey of more than 4,600 U.S. consumers, found 1 in 3 would be interested in the option to purchase items of clothing or accessories when watching their favorite streamed series on connected devices.