According to research by analyst firm The Diffusion Group (TDG), 79 per cent of Amazon Prime users cite free shipping as the primary reason they subscribe to the service. Only 11 per cent cite Prime Video, with a collective 10 per cent citing Prime Music, Photos, Reading, Twitch, or other benefits.
More than half of US adult broadband users currently subscribe to Amazon Prime. When asked which of the many benefits of Prime drives their loyalty to the service, eight in ten chose free shipping of retail purchases.
“While Amazon Prime is building robust audiences in video, music, and gaming, Prime is first and foremost about developing more and broader retail relationships, and free shipping is key to that mission,” advises Michael Greeson, TDG President and Director of Research. “That is where the real value of Prime lies.”
Adding high-quality digital media to Prime has certainly sweetened the deal and brought many new subscribers into the mix. Once they begin to buy more merchandise, however, service value appears to shift from media to free shipping. “This is not to diminish the value that digital media services add to the Prime equation,” notes Greeson, “but it puts it into perspective relative to retail.”
Greeson also points out that the retail benefits of Amazon Prime serves to differentiate it from media-only competitors such as Netflix and Hulu (video); Spotify and Apple (music); and Mixer, Owler, and Caffeine (gaming).
“The competitive threat that Amazon poses to the media industry is unique,” argues Greeson. “Video, music, and gaming services are largely loss leaders to Amazon’s cash-cow retail business. This strategy continues to enable the company to disrupt not only established media verticals but a widening array of other goods and services.”