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Amazon Prime: Scaling A Subscription Billing Service

© 2015 Vindicia, Inc. All rights reserved. Vindicia Confidential.

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Amazon Prime: Scaling A Subscription Billing Service

© 2015 Vindicia, Inc. All rights reserved. Vindicia Confidential.

While Amazon does not break out its Prime revenue, a recent research report estimates

that it has about 10 million subscribers and that the subscriber number apparently doubled

in the past year.

For frequent purchasers the lure of free shipping has always been very compelling, but

what Amazon has done right is to increase the value of the service over time. This axiom

should be true for any subscription service, whether you’re in the SaaS business like

ourselves or in the fulfillment/platform business like Amazon. Specifically, Amazon has

added the ability to watch streamed movies and also offers Prime members the ability

borrow books from the Kindle Lending Library, currently at about 150,000 titles and

counting. For a Kindle-owning family like ours, subsidizing our reading habits for $80 a

year seems well worth the cost of the membership, let alone all the ancillary benefits.

Amazon Prime has quietly become one of the larger

‘membership’ based subscription services in the industry.

3 © 2015 Vindicia, Inc. All rights reserved. Vindicia Confidential.

Of course, Amazon has the luxury of driving incremental revenue from subscribers who

purchase additional goods and services. The analysis would be how much additional

revenue Prime Members generate (beyond the annual $79 fee) to make up for the

subsidized shipping and the streaming/storage costs associated with its video and book

libraries. Even if the company is losing money on each subscriber, as some research

indicates, has that loss has diminished over time? In other words, can Amazon creating

economies of scale with the Prime Service at constant costs.

Subscription billing is a wonderful business model if done right, and Amazon is well on its

way to building a large scale model around this. For more information on the key elements

of customer retention associated with subscription billing, view our webinar that discusses

this topic at length.

Visit our Blog for more information.

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© 2015 Vindicia, Inc. All rights reserved. Vindicia Confidential.