Amazon AMZN, +3.60% raised the annual fee for its Prime membership program for the first time since 2014 — but that doesn’t necessarily mean it’s less of a bargain for most consumers.
The online retailer announced that it will hike the annual fee for a Prime membership in the U.S. by 20% to $119. The change comes as Amazon revealed that it now has more than 100 million people globally who are members of the program. In January, Amazon raised the price of monthly memberships from $10.99 to $12.99 per month. The price change will go into effect starting May 11 for new members and starting June 16 for existing members when they renew.
Amazon said that it was upping the price of a Prime membership to offset the costs the program incurs, thanks to free shipping and digital content streaming. “Since we increased the U.S. annual price of Prime four years ago both the value of Prime and the cost to offer it have increased significantly,” an Amazon spokeswoman said in an email. “We still believe that Prime is disproportionately more valuable than the fee.”
But consumers who are considering Prime—and those who are already members—will need to closely evaluate whether the membership is still worth it at the higher price. Ultimately, that decision will come down to how much benefit each individual consumer derives from the program, whose perks range from free two-day shipping on Amazon purchases to free online photo storage and free audiobooks from Audible.
“It’s easy to go on autopilot and renew your membership for these programs,” said Robert Harrow, head of credit-card research at personal-finance website ValuePenguin.com. “But if you’re not the type of consumer who takes advantage of all these services, it may not be worth it.”
Here’s how the benefits of an Amazon Prime membership shake out at the new price point:
Free shipping isn’t what it used to be
First and foremost, for those who do the majority of their shopping online, the free delivery options can theoretically pay for the cost of a Prime membership themselves. As an example, the cost of two-day shipping (which comes free with a Prime membership) for an external hard drive adds up to more than $11. So after just 10 two-day shipments, a Prime membership could pay for itself.
Prime members can also get free same-day, two-hour and release date delivery in many parts of the country if their order meets certain specifications. Recently, Amazon Prime members got a new benefit: Free two-hour grocery delivery from select Whole Foods locations.
While Prime’s free shipping options once set it apart, today it stands out less in this regard. Competitors have followed Amazon’s example. Walmart WMT, -0.74% has introduced free two-day shipping for millions of items online if the order is $35 or more.
And research has shown that Prime members double their spending on Amazon relative to non-Prime members, perhaps in order to justify the cost of membership. Depending on whether that increases a person’s spending overall, a Prime membership could easily become a budget buster.
Plus, many consumers have a Prime membership to take advantage of free shipping for holiday shopping, Harrow said. But these people may be better off without an annual membership. “They should consider canceling Prime for the year and just signing up for the months they use it,” he said.
Access to online content alone could make a Prime membership a bargain
The content-oriented perks alone could pay for a Prime membership. For starters, through Prime Video, members have free or low-cost access to thousands of TV shows and movies — including critically-acclaimed shows like the Amazon-produced “Transparent” and “The Marvelous Mrs. Maisel.” And music-lovers have free access to more than a million songs via Prime Music.
Meanwhile, Netflix NFLX, -0.71% costs $11 a month for its standard plan, which includes HD streaming and the ability to watch content on two screens simultaneously, and Hulu costs the same price for its commercial-free service. On the music side, Spotify SPOT, +2.16% costs $10 a month, and Pandora P, +0.37% offers ad-free music streaming for $3.99 per month.
Granted, competitors such as Netflix or Spotify might have more popular or extensive catalogs. Therefore, consumers shouldn’t evaluate the value of Prime Video or Prime Music based on price alone. “This largely comes down to personal taste and what people prefer,” Harrow said. In other words, if someone doesn’t like the content available on Amazon, then it’s not worth it.
And then there are all the unused freebies
In a thread on Reddit discussing Amazon Prime’s value in light of the price hike, many users were surprised to learn that they could get access to free video-game streams and discounts on games via Twitch Prime. Prime members without a Kindle or Fire tablet or the Kindle app on other mobile devices may not be taking advantage of the books and magazines they have access to.
Similarly, the discounts that members can get at Whole Foods are virtually worthless if someone doesn’t live near one.
Those benefits have a value if people actually use them. For instance, getting one free e-book per month through the Kindle library would equate to a $42 savings, according to CreditCards.com.
“When it comes to all these free things, people need to be realistic about whether they will actually use them,” said Harrow. “If you don’t take advantage of these things, then it’s not a good value.”
What do you think — is Amazon Prime worth the $119 price tag? If you are a member now, at what price would you give it up?