Apparently, Amazon Prime isn't as popular as many would like to think.
Current estimates from analysts have put the amount of Amazon Prime subscribers at 10 million or even more, a figure that would make the program a giant success in anyone's mind. But according to three insiders quoted by Bloomberg, those analysts are way off. They say that as of October 2011, only 3-5 million million have purchased memberships to Amazon Prime.
If you are unfamiliar with Amazon Prime, it's a $79 a year service that gives subscribers a boatload of benefits on shipping and content. As an Amazon Prime member, you have free two-day shipping and discounted rates on one-day shipping. As of late late year, if you elect not to expedite your shipping, you get a $1 MP3 credit. Prime members also have free access to Amazon's streaming library of movies and TV shows.
Amazon launched its Prime service in 2005.
But according to these sources, analysts have severely overestimated its popularity. They say that Amazon is looking to hit 10 million subscribers (at the high end) in the next year to year and a half.
In the last year, Amazon's shipping costs have ballooned to $4 billion, a big number considering that they only received $1.55 billion in shipping fees. But with Amazon Prime, is has always been about the long-term. The theory is that by providing the service, they will build loyalty and in the end, subscribers will spend way more than your average Amazon user.
Right now, Amazon it offering a one-moth free trial of Prime. They have also just inked a deal with Viacom to stream more content from MTV, Comedy Central, Spike, and CMT.
Last month, one analyst said that Amazon's newest venture, the Kindle Fire tablet, was more profitable than previously thought. Although the costs to manufacture the device exceeds the price by a couple of dollars, he said that Amazon will recoup those losses through e-book sales, app sales, and of course, paid memberships to Amazon Prime.