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Why Prime Is an Important Driver for Amazon’s International Growth

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Amazon managed strong growth for its international segment

Amazon (AMZN) has made strong improvements in the growth of its international segment. The year-over-year revenue growth rate continued to improve from -2% in 1Q15 to 24% in 1Q16, as the chart below shows. Amazon attributes this success to what it considers to be the most important driver: its Prime program. Prime is the company’s $99 per year program in which customers get fast shipping at no additional cost. Subscribers also get to watch thousands of on-demand videos for free with this program.

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Amazon mentioned that worldwide Prime subscriptions grew by a year-over-year rate of 51% in the last quarter. This growth was 47% for the US, which means the international Prime subscriber growth was even better. The Prime program is now present in most major countries except Mexico, India, and China (FXI).

Amazon to increase investment in original programming

To make the Prime program even more attractive, Amazon mentioned that it will work to beef up its video content. In addition to its video-on-demand service, Amazon is investing in producing more original programming. In the past, the company has managed to produce some successful original series like Transparent and The Man in the High Castle.

However, Amazon’s competitors Netflix (NFLX) and Hulu have even more ambitious plans to offer original programming. This year, Netflix plans to launch around 30 original series, eight original movies, 35 original series for kids, 12 documentaries, and nine stand-up comedy specials. Hulu is targeting 600 hours of original programming in 2016. Hulu is jointly owned by 21st Century Fox (FOXA), Comcast’s NBCUniversal (CMCSA), and The Walt Disney Company (DIS).

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