One of the things I liked most about Amazon Prime was the lack of commercials. It’s the latest streaming service to change all that.
A funny thing happened when I launched Amazon Prime. I received a popup message inviting me to pay extra to avoid streaming commercial breaks.
The fee itself, in the grand scheme of things, seems small. They want $2.99 per month. But that’s three bucks a month on top of what it already costs for Prime. And that went up in 2022 to $139, a 17% increase over the former price. Since it debuted, the service has nearly doubled in price from its original $79 fee.
So we’re paying more and more for the same service minus the advertising.
As someone who works in TV, I definitely get it. Television — even streaming TV — isn’t free. It isn’t cheap. Services like Amazon Prime, Netflix, Hulu and others have to pay to license the programming the offer. Advertising helps offset that cost. If they don’t make enough in subscriptions, they’re going to threaten their customers with the thing streaming viewers hate: commercials!
One might hope Amazon Prime would have at least started the higher-priced plan when it came time for each individual customer’s subscription to Prime was up for renewal. But starting it for everyone feels a little dishonest to the customers who already paid their full price.
Welcome back, ‘Commercials Era’
A recent article in The Atlantic claims TV is “back” in its “Commercials Era.” Broadcast and cable television never left that era. But many streaming services launched without ads. That might be part of the reason some streaming platforms took off.
Lora Kelley writes that Amazon Prime joined the ranks of Netflix and Disney+, both of which added commercial-supported ad tiers despite previous assurances that they wouldn’t do such a thing. But in Amazon’s case, Kelley points out it’s practically a win-win for Amazon:
Analysts are projecting that the changes will generate billions of dollars in revenue for Amazon. If viewers pay for the ad-free tier, that’s $3 more per person; if they opt not to upgrade, Amazon can make money by showing them ads.
The only thing they might lose out on is customers who get so fed up that they decide not to renew their Prime subscription. But as annoying as some think the commercials (or having to pay to ditch them) might be, how many will actually abandon the service completely?
Axios tallied up a handful of recent price hikes. It listed Max as raising its ad-free plan by $1 to $15.99 per month. Peacock increased the price of its ad-supported service by $1 to $5.99 but increased the ad-free version by $2 to $11.99.
Netflix dropped its cheapest ad-free plan, which cost $9.99 per month. It then started charging $6.99 per month for an ad-supported service. One might think they could just continue paying the $9.99 for the ad-free experience. Unfortuantely, to go ad-free on Netflix, you’ll end up paying anywhere from $15.99 to $22.99 per month. When the ad-free version of Netflix rises past the ad-free cost of subscription cable platforms like Max, that definitely feels wrong.
Some ad-supported channels are doing well…despite commercials
But then there are so-called Fast channels like Tubi which are commercial-supported television — or FAST — channels. They’re channels like Freevee, which is owned by Amazon, and Tubi, just to name a few.
Broadcasting+Cable recently reported those channels are getting a good bit of attention lately. It cited a new report from smart TV maker Vizio and attention research company Adelaide. The report found that FAST channels outperformed linear television by 35% to 40%.
Linear television, for those keeping score, are traditional television channels — local broadcast and national cable — that aren’t video-on-demand. In other words, you tune in and watch what they’re playing at that moment.
I do watch a good deal of movies and an occasional TV episode on Tubi, I’ve watched a handful of TV show episodes on Freevee. Redbox (and a few other FAST channels) offer live linear TV as well. I sometimes watch classic episodes of The Price is Right with Bob Barker on Redbox’s “The Price is RIght: The Barker Era” channel.
The point is that people are tolerating commercials in those channels quite well, it would seem.
But they’re tolerating those commercials while the content is free. They’re less likely to tolerate those commercials if they can get content they want when they want and have to pay for it, too.
Is history about to repeat itself?
I’m old enough to remember when cable television first came to our community. Back then, HBO more often went by its full name, Home Box Office. And back then, HBO wasn’t a 24-hour channel. In fact, it didn’t display its first film of the night until after 5 p.m. or 6 p.m.
For what seemed like a reasonable amount of money, you suddenly went from three or four channels to more than a dozen. Depending on how much you were willing to pay per month, you might get two or three dozen channels to surf through.
But over time, cable prices started creeping up. Everyone had their hand in the till. Cable networks like ESPN were so expensive for cable carriers that they have to charge extra to a customer’s basic cable pill to pay for them. The customers can’t opt-out of individual networks. I never watched ESPN…but I was stuck paying for it with cable and it was the single most expensive channel in the lineup.
Networks and television stations kept fighting for their share of cable subscriptions, which drove subscription prices up. Eventually, when streaming options came along, customers realized they could watch shows they wanted to watch any time and without a lot of channels they never used.
The cord-cutting age began when people realized they could get what at least felt like more programming choices for less money.
But when streaming options like Amazon Prime, Netflix and Hulu start charging more and more to dodge commercials, they’re going to reach their irritation point with customers eventually. Netflix is likely the first one I’ll eventually drop; they’re showing less and less stuff I’m particularly interested in. In fact, I watch more on Tubi than I do on Netflix and Tubi is free.
Philo costs me about $25 per month and gives me about 60 cable channels. But it also lets me temporarily save recordings of specific shows I select. It’s the best of both worlds between linear and on-demand. It does include commercials because commercials are part of the normal programming feeds of channels like MeTV, Investigation Discovery and H&I. But in many cases, I can fast-forward through the commercials. (I mean, how many times do I have to watch that Jardiance spot?)
Channels that charge people more the privilege of skipping commercials are going to have to be careful when it comes to price hikes. Otherwise, with more of them edging prices higher, the streaming option will no longer be cheaper than the old cable option used to be.
Customers will — sooner or later — fight back by canceling their subscriptions. And that will only drive the prices higher for those who decide to stay. Cable television has seen that domino effect.
Let’s hope streamers wake up to that danger before they alienate the very customers they did such a good job pulling from cable!