How Much Can Prime Subscriptions Add To Amazon’s Net Revenues?

+13.82%
Upside
180
Market
205
Trefis
AMZN: Amazon logo
AMZN
Amazon

Until yesterday, the total number of Amazon (NASDAQ:AMZN) Prime subscribers had been somewhat of a mystery before Jeff Bezos revealed that the tech giant had crossed 100 million paid subscribers globally. While it does not tell the exact number of subscribers, it gives a ballpark figure to help estimate the historic subscriber count, which we use to forecast growth potential. In this note we take a look at how we have arrived at our historic subscriber count and our forecast for the total paying Prime members. We also forecast the average annual Prime subscription fee to finally arrive at the total revenues that standalone Prime subscriptions can add to Amazon’s top line through 2020.

We forecast the total number of paying Prime subscribers to increase to 164 million by 2020, while the average annual Prime subscription fees are expected to increase from around $97 in 2017 to nearly $110 by 2020. As a result, standalone Prime subscriptions could add around $18 billion to Amazon’s top line by 2020. We have summarized our forecasts in an interactive model. You can modify these inputs to see how they impact expected revenue contribution. We further detail how Amazon’s other revenue streams are expected to grow, per Trefis estimates. You can change all input figures to gauge how much standalone Prime subscriptions will contribute to Amazon’s top line.

Relevant Articles
  1. Up More Than 100% Since The Start Of 2023, Where Is Amazon Stock Headed?
  2. Amazon Stock Outperformed The Q3 Estimates, What’s Next?
  3. Amazon Stock Is Up 50% YTD, Can It Top The Estimates In Q3?
  4. Amazon Stock Surpassed The Street Expectations In Q2
  5. Amazon Stock Is Undervalued
  6. Amazon Stock To Beat The Consensus In Q1

Numbers Behind Historicals And Our Forecasts

In the 13 years since the company launched Amazon Prime, the most recent reported mention of total Prime subscribers was back in December 2013, when the company reported to have “tens of millions” Prime subscribers.  This implies at least 20 million subscribers, which was the starting point used in an analysis by Recode. This was followed by a 53% increase in paid subscriptions in 2014 and subsequently by a 51% annual increase in 2015. The total number of Prime subscribers increased by “tens of millions” in 2016, or 20 million as confirmed by TechCrunch. And lastly, we have a figure of 100 million subscribers by the end of 2017.

We considered 22 million subscribers for 2013, which gives us the following subscriber count in subsequent years – 34 million for 2014, 51 million for 2015, 71 million for 2016 and 100 million for 2017. Also mentioned in Bezos’ letter to shareholders is that more members joined Prime subscription in 2017 than in any previous year, which fits fairly well with the numbers we’ve used.

In order to calculate the average subscription fee per account, we considered the combined revenues from Prime membership, audiobook, e-book, digital video, digital music and other non-AWS services revenues reported by the company in its SEC filings. We used the total revenues generated by non-AWS services and divided it by the total subscribers to get the implied average subscription fee per member. Amazon offers various other benefits to Prime members in addition to shipping benefits such as access to Prime Video, Prime Music, Twitch Prime, Prime Early Access, Kindle Owners’ Lending Library and supplemental service offerings such as Amazon Channels (HBO, Showtime, Starz) and Amazon Fresh. As a result, the calculated fee per member is actually the average implied expenditure per paying member on Amazon services. If, over the long run, Amazon decides to club all these services under a common Prime subscription fee (it already clubs most of them), then this figure will be nearly the same as the average Prime subscription fee per member. Based on these numbers, we arrive at an implied average subscription fee per user of $88 in 2015, $90 in 2016 and $97 in 2017.

In terms of geographic variance, the annual fee in the U.S. currently stands at $99, while it varies from £79 ($112) in U.K, €69 in Germany, €49 in France, ¥3,900 (around $36) in Japan to 999 (approximately $16) in India. Mature markets generally have a higher subscription fee than growing markets. Further members availing of supplemental services pay more ($15 per month for Amazon Fresh or $5-15 per month for Amazon Channels) to drive their annual subscription fee higher. The add-on services are increasingly becoming more popular among users, and the mature North America and European markets are lucrative enough to drive average subscription fees higher. However, this will be likely offset by massive growth in revenues from emerging markets, which typically have a lower average subscription fee. As a result, we have a conservative forecast for average Prime subscription fee per member to increase gradually to around $110 by the end of the decade. As a result, we expect the contribution of standalone subscription fee to Amazon’s non-AWS revenues to cap at around 6% through 2020. If you think differently, you can modify these inputs on our interactive dashboard model and come up with your own estimates.

What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs

For CFOs and Finance Teams | Product, R&D, and Marketing Teams

More Trefis Research

Like our charts? Explore example interactive dashboards and create your own