Amazon Prime Is Worth the Cost for Most Despite the Price Increase

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May. 5 2022, Published 9:41 a.m. ET

In February 2022, Amazon Prime increased its subscription costs in the U.S. Amazon increased the prices for its monthly subscription from $12.99 to $14.99, while the yearly subscription price increased by $20 to $139. Even the Prime Student account subscription went up by $10 to $69 per year. Is Amazon Prime still worth it for most people?

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There has been a streaming war, not only in the U.S. but globally. Consumers have been spoilt for choices and streaming companies have had to increase the outlay towards content to retain and attract new users. Amazon Prime is a bundled service and along with the streaming content, it also provides priority delivery benefits to subscribers.

A JPMorgan analyst thinks Amazon Prime is worth $1,000.

JPMorgan analyst Doug Anmuth said in 2021 that if unbundled, Amazon Prime was worth $1,000, which was 8.4 times more than Prime's price in the U.S. for the yearly subscription at the time. The analyst, who is still overweight on Amazon stock and has a target price of $4,000, calculated Prime’s worth at $860 in 2020.

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From Amazon’s perspective, Prime has been a key growth driver. The service has helped Amazon better serve its customers with faster deliveries. The offering gels well within the Amazon ecosystem and creates a network effect and helps increase customers sticking to the core e-commerce platform.

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What benefits do Prime members get?

Prime members get several benefits with the bundled subscription. First, the service offers unlimited streaming. Amazon has been adding new content and its library received another boost with the MGM acquisition.

Prime members get a head start on Prime Day as well as Lightning Deals. Given how fast some of the popular items fly off the shelf during Prime Day, a Prime membership gives users a better chance of grabbing their favorite products. If you're a frequent shopper on Amazon, which most Prime members usually are, the membership might pay for itself just with the savings on delivery fees.

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There are ancillary benefits of a Prime subscription.

Along with streaming, free deliveries, and early access on Amazon, the Prime membership comes with several ancillary benefits. Amazon Photos can help you save on your spending on cloud storage.

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Prime Reading is another benefit of the subscription as well as Prime Gaming. While some of the users might not use the service, it's important for many others. Prime subscribers get free access to Prime Music and discounts on some of the items at Whole Foods.

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Is Amazon Prime worth it?

Amazon Prime appears to be worth every penny that you pay. First, the price compares favorably with Netflix even though one may argue that the latter’s library has more content. Also, Prime delivery allows you to get products quickly and save on shipping costs.

Prime's worth increases even more if you look at the opportunity cost. If you shop at a physical store, you would spend a lot of time and possibly pay a higher amount. If you use your car to visit the store, add the price of gas, which has been rising steeply.

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With a Prime subscription and free same-day deliveries, you can get better discounts on the daily use items while also getting streaming benefits. To sum it up, Prime appears to be worth the cost for most members.

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