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article imageAmazon raising price of Prime membership by $20 a year

By Karen Graham     Apr 27, 2018 in Business
Amazon.com's 20 percent hike in the cost of Prime membership should deliver more than $1 billion in extra revenue this year and cover any “rational” hike in United States Postal Service delivery fees, Wall Street analysts said on Friday.
Amazon announced the price hike during an investors call on Thursday, with the change going into effect on May 11 and applying to Prime renewals beginning June 16, according to Reuters.
"We continue to increase the value of Prime," Amazon CFO Brian Olsavsky said on the call, adding that the company has added "digital benefits," like Prime Video.
And the company's shares were up 7.4 percent on Friday to a record high of $1630 in premarket trading, after almost doubling its projected first-quarter profits. The blockbuster quarter included profits of $1.6 billion and revenue of $51 billion.
“Amazon delivered a humongous quarter, with faster growth and higher profitability than Street projections and followed up with a one-two punch by announcing it was raising annual Prime membership fee,” Deutsche Bank Lloyd Walmsley said.
Prime price hike the first since 2014
When Prime was first launched in 2005, the service cost members $79 a year. In 2014, Amazon raised Prime membership to $99 a year. The service is key to driving purchases of both goods and digital media on Amazon.
Prime members get free delivery, access to movies and original series through Prime Video, and on-demand music streaming and free books on Prime Reading. Football fans will be pleased to know that during the same call on Thursday, Amazon said they had made a deal with the National Football League.
Viewers won’t need to switch channels to watch football. For the tidy sum of $130 million, Amazon and the NFL agreed to stream Thursday night football games online.
And for viewers with an Amazon Fire TV, they can place an order for a tray of organic food snacks from Whole Foods without leaving their chair. According to Digital Trends, Amazon told investors the company’s plans to deliver Whole Foods grocery orders directly to doorsteps are in the works.
The price increase only applies to Amazon Prime members in the United States. At this time, it is not known how much Amazon will bump up its Prime membership rates outside the U.S. But the raise adds $2 billion to Amazon’s coffers.
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