NEW YORK – Amazon is betting that shoppers will pay $20 more for its popular Prime two-day free shipping and video streaming service of movies and TV shows.
The mega online retailer said Thursday that it is raising the price of Prime to $99 a year as it seeks to offset rising costs to ship products to customers. It’s the first price increase since Amazon rolled out the service in 2005.
The move could please investors at a time when Amazon continues to face pressure to boost its bottom line after years of furious growth. As more Americans shop online, Amazon has spent heavily to expand its business into new areas – from movie streaming to e-readers and groceries – often at the expense of its profit.
But the price increase also threatens to scare away online shoppers who tend to resist fee hikes. The company, which warned it would probably raise the price of Prime by $20 to $40 in January, is bolstering the membership program by adding more items available for two-day shipping and rolling out a greater selection of streaming TV shows and movies.
Still, online shoppers don’t always react favorably to price increases. For example, when Netflix tried to raise its annual subscription fee in 2011. The online video streaming service had to do an about-face after widespread customer backlash and a jarring stock plunge of 80 percent from its highs.
Social media was buzzing Thursday after Amazon announced the price hike. Many Prime users’ comments fell equally on either side of the fence between those who didn’t mind the increase and those who planned to stop using the program.