Amazon Just Announced a Surprising $1.6 Billion in Profits. Why Is It Raising Prime to $119 a Year?

Amazon just announced that it made more money than anyone ever expected in the first three months of 2018–and that it’s raising its subscription price for Prime members from $99 to $119. If you don’t want to pay the new price, you do have other choices.

Amazon’s anticipated quarterly report contained good news and bad news. There’s good news for the company: Its earnings beat all expectations, with revenues of $51 billion and profits of $1.6 billion in the first three months of the year. And then there was bad news for Amazon customers, at least those of us in the United States: The company is increasing the annual price of a Prime subscription from $99 a year to $119 a year. The new pricing takes effect next month for new subscribers and the month after that for existing ones. As you likely already know, Prime is Amazon’s subscription service that offers free two-day shipping on many items as well as access to much of Amazon’s streaming video content and some books as well.

If you own or run a business, when do you raise prices? Usually it’s when you need to because your costs are going up and your profits are slipping–not on the same day that you announced you made more money than anyone ever imagined you could. But apparently if you’re Jeff Bezos, just because your company is doing extraordinarily well is no reason to give its most loyal customers a break.

What’s Amazon’s reasoning for announcing a Prime price hike on the same day it released amazingly high profits? There are a few. First, the program in itself is unprofitable–shipping things for free can get expensive–and Wall Street analysts have criticized the company for losing money on Prime. Second, Amazon can argue that we’re getting more for our money now since the number of items available with free shipping to Prime members has grown from 20 million items to 100 million items. And lastly, the company has been pouring a lot of money into original programming that Prime members can watch for free, although I personally have never found an Amazon original show that I thought was worth my time. Prime members who are Thursday night football fans and don’t have access to broadcast TV will be glad to know that the company has renewed its deal with the NFL and will stream those games again this fall, however.

Amazon’s real reason for raising Prime prices is probably simply because it can. For the first time, it has released the number of Prime subscribers worldwide, which Amazon says now is over 100 million. Interestingly, though, by at least one popular estimate, that number is a lot lower than it should be.

The real question for Prime members is this: If you don’t want to pay an extra $20 a year to a company that’s already getting very rich off your purchases, is there a viable alternative? The answer, surprisingly, is yes. Walmart, perhaps the only retailer with a varied enough inventory to compete meaningfully with Amazon has been going after Prime members, and Amazon customers in general in a big way, providing not only two-day shipping (previously by membership, now free on any order over $35), as well as upping its grocery game to compete with Amazon/Whole Foods in the grocery space.

As far as streaming content is concerned, consider Netflix, Hulu, Spotify, or perhaps the new combined Hulu/Spotify Premium service announced this month. At $12.99 a month it admittedly costs more per year than even the new higher-priced Prime subscription, but the vastly wider selection of both video and music content, and the fact that you’ll be able to watch network shows one day after they air (while shopping online at Walmart.com) should more than make up for that. Plus Hulu/Spotify is offering subscribers to the combined service three months for $.99. That will make it slightly less costly than a Prime subscription for the first year.