Amazon CFO Brian Olsavsky says the company’s execs “feel good” about the recent expansion of advertising on Prime Video, calling it “an important part of the total business model.”
Ads began running this month on scripted series and films on Prime Video, except for subscribers who opt to pay an extra $3 a month in order to avoid ads. Amazon’s approach has differed from that of streaming rivals like Netflix, which rolled out a lower-priced tier with ads as an option instead of forcing those who want to stay ad-free to pay extra.
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Olsavsky was asked about the state of the video ad initiative during a conference call with Wall Street analysts to discuss fourth-quarter earnings. Amazon reported strong financial results in the quarter, beating Wall Street expectations for the holiday period. Overall advertising services revenue, which includes Prime Video, helped drive the quarterly performance with a 27% jump over year-ago levels.
Asked to provide a sense of the potential size and scale of the Prime Video ad opportunity, the CFO replied, “I can’t scale it right now. What I would say for ads in video is that advertisers are excited to access our Prime customer base. We’re looking for ways to increase advertising on our streaming properties. … It’s an important part of the total business model.”
The management team expects the expansion of advertising to “allow us to have a healthy business, to continue to invest in content and to continue to grow,” Olsavsky continued. “We feel good about it. The way we anticipate ads progressing, it will not have heavy ad loads relative to what you see network TV and others have. Like all of our advertising, we try to be useful to customers.”
Many Prime Video viewers have already encountered ads as part of live sports programming, notably NFL Thursday Night Football. The outlet’s embrace of ads is in keeping with an overall industry shift in streaming, which years ago had a pronounced bias toward the ad-free subscription model. Now, as Netflix has sought to stimulate new growth and newer players reckon with the difficult economics of streaming, only Apple TV+ remains (for now) as a general-audience offering without advertising.
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