Amazon CEO Andy Jassy expressed optimism on Thursday that Prime Video is on track to become a “large and profitable business” as the company’s advertising revenue surged 27% year over year to $14.6 billion in the fourth quarter of 2023.
“As we made dramatic year-over-year gains in ad sales, we have increasing conviction that Prime Video can be a large and profitable business on its own and will continue to invest in compelling exclusive content for Prime members like ‘Thursday Night Football,’ ‘Lord of the Rings,’ ‘Reacher,’ ‘Mr. and Mrs. Smith,’ ‘Citadel’ and more,” Jassy told analysts on the company’s earnings call. “And with the addition of ads on Prime Video, we’ll be able to continue investing meaningfully in content over time.”
Prime Video’s ad tier officially launched Monday and will be the default for all subscribers. The streamer will offer a new ad-free option for an additional $2.99 per month for U.S. members. Currently, Amazon Prime, which includes Prime Video, costs $14.99 per month or $139 a year. A membership that only includes Prime Video and none of the company’s shipping benefits costs $8.99 a month.
When asked to provide a sense of the scale and ad opportunity of Prime Video, Amazon chief financial officer Brian Olsavsky said he “can’t scale it right now.”
“What I would say for ads in video that advertisers are excited to access our customer base. We’re looking for ways to increase our advertising and our streaming properties, including Fire TV in Prime Video, but also things like Freevee and Twitch and it’s an important part of the total business model,” he added. “And we expect it will allow us to have a healthy business to continue to invest in content and to continue to grow that and we feel good about it.”
Olsavsky reiterated that Prime Video would aim to have fewer ads than linear TV and other streaming TV providers. The ad tier’s initial rollout includes the U.S., U.K., Germany and Canada, followed by France, Italy, Spain, Mexico and Australia later this year.
The remarks come after Amazon laid off hundreds of staff members in its Prime Video and Amazon MGM Studios divisions earlier in January. The layoffs, which the company said impacted a small percentage of the division’s overall workforce, are part of a plan to consolidate Amazon Studios and MGM’s theatrical distribution team. MGM’s Scripted Television team and the MGM+ Productions team will be combining to form a unified creative group.
In addition to the gains in overall ad sales, Amazon saw subscriptions revenue increase 14% year over year to $10.4 billion. Subscriptions revenue includes annual and monthly fees associated with Amazon Prime memberships, as well as digital video, audiobook, digital music, e-book, and other non-AWS subscription services.
Overall, the tech giant posted a net sales increase of 14% year over year to $170 billion and net income climbed to $10.6 billion, or $1 per diluted share, compared to $278 million, or 3 cents per share, a year earlier. Analysts surveyed by Zacks Investment Research were expecting net sales of $166.2 billion and earnings of 81 cents per share.
Amazon shares surged over 7% in after-hours trading Thursday following the release of its latest quarterly results.
