TDG: free shipping, not content, is key driver for Amazon Prime

The vast majority of Amazon Prime users in the US still sign up for the service because they can benefit from free shipping of goods rather than to access Amazon Prime Video content, according to new research by The Diffusion Group (TDG).

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According to TDG, 79% of Amazon Prime users cite free shipping as the primary reason they subscribe to the service. Only 11% cite Prime Video, with a collective 10% citing Prime Music, Photos, Reading, Twitch, or other benefits.

More than half of US adult broadband users currently subscribe to Amazon Prime. When asked which of the many benefits of Prime drives their loyalty to the service, eight in ten chose free shipping of retail purchases, according to TDG.

The research outfit said that the availability of digital media content as part of the offering had brought new subscribers to the platform. However, once they begin to buy more merchandise, service value appears to shift from media to free shipping.

In addition, said TDG, the retail benefits of Amazon Prime serve to differentiate it from media-only competitors like Netflix and Hulu with their video-only offerings, and Spotify and Apple’s music services.

“While Amazon Prime is building robust audiences in video, music, and gaming. Prime is first and foremost about developing more and broader retail relationships, and free shipping is key to that mission. That is where the real value of Prime lies,” said Michael Greeson, TDG president and director of research.

“This is not to diminish the value that digital media services add to the Prime equation, but it puts it into perspective relative to retail. The competitive threat that Amazon poses to the media industry is unique. Video, music, and gaming services are largely loss leaders to Amazon’s cash-cow retail business. This strategy continues to enable the company to disrupt not only established media verticals but a widening array of other goods and services.”

TDG’s research chimes with UK regulator Ofcom’s recently published Media Nations report, which found that obtaining free shipping is still the main reason to subscribe to Amazon Prime in the UK, although this is declining in importance, down from 71% a year ago to 51% in Q1, compared with 20% who cited original content or content not available elsewhere as a reason to sign up.