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Amazon hikes up price of Prime to $119 a year

JP Mangalindan
Chief Tech Correspondent

Amazon (AMZN) announced on Thursday that it’s raising the price on Amazon Prime, its popular subscription service, from $99 a year to $119 a year.

Starting May 11, anyone who signs up for a new Prime subscription will find they need to pony up $20 more per year than previously. For current Amazon Prime users, they’ll see a bit of a grace period, with Prime renewal prices climbing to $119 a year on June 16.

As Amazon CFO Brian Olsavsky pointed out on the company’s earnings call on Thursday afternoon, this is the second time Amazon has raised prices on Prime, with the first price hike occurring in March 2014.

“We still think it’s the best deal in retail, and we’re continuing to make it better each day,” Olsavsky said on the earnings call.

Since Amazon launched Prime in 2005, the subscription service has transformed the way shoppers experience online retail by standardizing 2-day fast shipping. The company has also added on a stable of media services for Prime users to enjoy, including video and music streaming. Indeed, Prime has become so successful, Amazon CEO Jeff Bezos announced in mid-April a milestone of more than 100 million Prime users.

Despite that, however, Prime is thought by many analysts to be a money-losing proposition — the company, instead, views it as a way to hook and retain shoppers — with some estimates suggesting the company has lost billions of dollars on Prime in more recent years because Amazon does not traditionally factor in a big profit margin into services and products like Prime. Its Kindle e-readers, for instance, are sold “at-cost,” meaning Amazon does not make a significant profit off the sale of those devices.

No doubt Thursday’s announcement is an effort on Amazon’s part to help ameliorate those losses, particularly as it continues to pour over $3 billion a year into the creation of original series and films.

The news came as Amazon released first-quarter 2018 earnings on Thursday. The Seattle tech giant reported earnings of $3.27 per share on $51 billion in revenues for the quarter, blowing past estimates from Wall Street analysts, who were generally expecting $1.27 per share on revenues of $49.96 billion. Amazon stock surged over 6% in after-hours trading.

JP Mangalindan is the Chief Tech Correspondent for Yahoo Finance covering the intersection of tech and business. Email story tips and musings to jpm@oath.com. Follow him on Twitter or Facebook.

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