How bitter should we be that Amazon is going to show commercials this year?

Amazon Prime announced that it will start showing ads during shows and movies starting January 29, 2024. This announcement is highly unfortunate for those not really interested in buying anything based on a cute or mildly funny 30-second video. We just want to watch the show.

All is not lost. You can pay more for getting ad-free viewing. Depending on what you read, it will cost you between $3 and $6 to watch shows without interruption. Amazon will not change the price for base prime, you'll just need to pay more, most likely $2.99/month, to avoid ads.

How mad should we be?

First, charging for an ad-free environment is not something new and Amazon definitely did not invent the concept. Hulu has had an ad-free option for a long time. Pandora and Spotify music services have ad-free options. In fact, you can listen to Pandora for free with ads.

Hulu's ad-free environment can be very frustrating. Some shows still show ads when you are paying for ad-free. Some shows you can DVR and therefore bypass ads by fast forwarding. Some shows you can't DVR.

The streaming world is definitely telling us that if you want to save yourself 15 (ish) minutes for a show, you'll need to pay for it.

Now, Amazon has not said what "limited commercials" are going to look like and we may not know until January 29. But we can guess that however it starts, "limited" will turn into "not so limited" over time. Peacock does a nice job of making you watch of watching multiple minutes of commercials up front for an ad-free experience for the rest of the show.

Does Amazon have to make this plan change or are they gouging us?

Taking a bit of a dive into the numbers, it is estimated that Amazon had about 67 million US subscribers in 2022 and 117 million subscribers worldwide. They are still trying to catch Netflix for the number 1 spot, but they are doing OK.

In 2022, Amazon spent $16.6 billion on TV, movies, and music. It is extremely difficult to find revenue numbers for just Amazon Prime Video. In 2022, Amazon subscription services generated $35.2 billion, but that includes the general Amazon Prime service which is huge. According to BusinessDIT, Amazon Prime Video generated $3.6 billion in revenue in 2020 and was estimated to reach $5.16 billion by 2022.

Even assuming that Amazon beat those numbers and showed a further increase in 2023, they are still operating at a loss. As many streamers like Disney+, AMC+, Peacock, and Paramount+ also claim.

The bottom line is that, of course, we should be bitter because something is being taken away from us. The Amazon move seems like the Uber or Lyft play in ridesharing where we were very used to very reasonable prices for several years. Then, that changed. Surge pricing. New fees showing up. Confusion over priority pick-up and cancellation fees.

However, the old adage is that you don't get something for nothing, and Amazon is just reminding us of that. You'll need to watch for partnerships with other services you use like cable and mobile phone. For instance, with T-Mobile, I get Netflix ad-free for the price of the standard package.

We are very good at multi-tasking, and we'll probably check out our phones during commercials. So, it may cost us time, but we'll fill the void with other content. Technically, we aren't watching the ads.

What does it mean for cord cutting?

As the price of each individual app gets more expensive with fewer services (as is happening every year), it will open the door back up for cable and satellite. If they can bundle these services with real cost savings, buying the individual app from a Roku or Apple TV service becomes less enticing.

In the short term, I think we should be mad, we should feel ripped off, and we should feel bitter. But I am going to continue watching Jack Reacher.