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Amazon's 25% Prime Price Increase Looks Smart


From the Buzz & Banter: Investors are cheering the company's decision.

PrintPRINT (NASDAQ:AMZN) announced it is raising the price of its Prime service to $99 from $79.

This follows pricing changes in the UK and Germany that raised prices for some Prime users, and discussions on its last eanings call (subscription required to read links) that the Prime price could go up by $20-40.

Amazon is passing along more fuel and shipping costs to its Prime shoppers, and a 25% hike after nine years of being in service seems pretty reasonable. Many people are forgetting that Prime includes access to Amazon's video streaming service, which competes with Netflix (NASDAQ:NFLX), and video-on-demand offerings from the likes of Comcast (NASDAQ:CMCSA) and Time Warner Cable (NYSE:TWC).

I would assume that Amazon hasn't seen much resistance in the UK and Germany, or much worry from domestic customers stemming from past hints of price hikes.

Late last year, research firm CIRP said Prime shoppers spend $1,340 annually, while non-Prime customers spend $650.

If someone's spending that much money on Amazon, it's probably somewhat integral to their lifestyle and they'll still be saving on shipping, so $20 likely won't be a big deal.

As for the people for whom the extra $20 is an issue, they probably weren't spending all that much anyway.

I'm an Amazon Prime customer and quite happy with the service, so I'll probably stick around. In fact, I might actually have to start spending more to make the $99 worth it.

Now excuse me while I order a 10-pack of deodorant, a case of granola bars, and a backup pirate flag.

Yes, I used Prime to order a pirate flag:

Thus far, Amazon shares are reacting positively, ticking up $9 in pre-market trading.

Also note, if you're not yet an Amazon customer, you can sign up within the next seven days and lock in the old price of $79.

Twitter: @MichaelComeau

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