Amazon is looking to expand its Prime Video business in 2025, introducing advertisements in five new major markets, including India. The company announced the expansion plans at its Amazon UnBoxed conference in Austin, Texas. “To continue investing in compelling content and keep increasing that investment over a long period of time, starting in 2025, Prime Video shows and movies will include limited advertisements in India,” said the company.

Amazon currently includes ads on Prime Video in the US, the UK, Australia, Austria, Canada, France, Germany, Italy, Mexico and Spain, and gives viewers in those countries the option to pay to continue receiving an ad-free feed. That will be the case for the new countries to be added in the new year. “We will also offer a new ad-free option and will share the price of that option at a later date,” the streamer said.
The current Prime membership fee will remain unchanged for those opting for the ad-supported version. Prime Lite subscribers will continue to see ads as part of their existing plan.

Amazon’s announcement comes at a time when rival Netflix is also considering introducing a free, ad-supported tier in India and other markets. The company is also testing pause ads, which appears when a viewer pauses what he is watching.

Amazon says the new ad-supported feed will “help brands of all sizes connect with new audiences in new countries”. However, analysts point at intense competition and the pressure on subscription revenue as the prime reasons for adding a new ad tier in India. “With the cost of streaming increasing exponentially, it was just a matter of time before Amazon Prime changed its traditional model and included ads,” Yorick Pinto, senior creative director, BC Web Wise said.

“The need to introduce ads is very clear — it is not being able to scale up subscription revenue beyond a point,” said Karan Taurani, an analyst at Elara Capital. “At the start of the year, we saw Jio Cinema making premium content (IPL) free. That intensified pressure on all subscription-based platforms.”

The problem is the viewer propensity to go for free content. India has around547 million OTT users, but active paid subscriptions remain stagnant at 99.6 million, according to Ormax OTT Audience Report 2024. While the AVOD (ad supported video on demand) segment has grown 21% as compared to the previous year, the SVOD (subscription-based video on demand) segment has reported a growth of just over 13%.

“Growth is slowing down because most people who can afford subscriptions already have them. To keep growing, companies need to attract new audiences and encourage current subscribers to buy more subscriptions. In cities, people already have an average of four subscriptions each,” said Keerat Grewal, head, business development (streaming, TV, and brands), Ormax Media. And that is a tough call.
Back of the envelope calculations show, the cost of home entertainment is at least 2,500 a month for an average Indian consumer. If one were to break it down, they typically pay around300-500 as the monthly recharge fee for a direct-to-home (DTH) service and another 1,000 for a basic broadband service. Adding to that the average cost of four OTT subscritions — say, Netflix at about499, 299 for Prime Video,29 for Jio Cinema, and another `299 for Hotstar premium — the scope to add more paying subscribers appears limited.

Jio’s strategy of offering services at bargain basement prices is making things increasingly tricky for competitors, say analysts. “The low ARPU realisation is killing,” an analyst said. “Against the average market rate of 80-100 per month, Jio Cinema’s is29. There is also competition from rivals with deep pockets, such as Google and Meta, that are trying to expand in India.”

These global tech giants have “played a pivotal role in expanding India’s video market, now estimated to be worth $8.8bn in revenue for content owners”, according to a report by research firm Media Partners Asia. AVOD comprises about 60-65% of this market; with SVOD making up the balance.

Under such circumstances, shifting focus away from subscription and trying to grow revenues from the AVOD base seems the obvious option, says Taurani. Looking ahead, BC Web Wise’s Pinto says, “With an integration with Amazon’s marketplace, I see brands exploring shoppable ads to drive bottom of the funnel engagement.”

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