Amazon Prime Video

Ever since Spotify first launched, the workings of a ‘freemium’ music-streaming service have been clear. If you listen for free, you get ads, and if you pay for a subscription, you don’t.

The ‘pay to remove ads’ dynamic has been less clearcut in the video-streaming world though, and Amazon’s latest move with its Prime Video service is a good example of that.

“To continue investing in compelling content and keep increasing that investment over a long period of time, starting in early 2024, Prime Video shows and movies will include limited advertisements,” announced Amazon on Friday.

The US, UK, Germany and Canada will be first to get the change, followed by France, Italy, Spain, Mexico and Australia later in the year. And here’s the key additional detail: “We will also offer a new ad-free option for an additional $2.99 per month for U.S. Prime members and will share pricing for other countries at a later date.”

There will still be an ad-free version of Prime Video: it’s just that people will have to pay three dollars a month more for it. This is an increasingly-common model for online video: Netflix launched its ‘Basic with Ads’ tier in October 2022, shortly before Disney+ debuted its ‘Standard with Ads’ tier.

Hulu, Peacock and other video services also have ad-supported paid tiers. A recent report by research firm Insider Intelligence suggested that 69% of Peacock’s paying subscribers choose the ad-supported tier, with that figure standing at 58% for Hulu; 36% for Disney+ and 18% for Netflix. It noted that the latter two’s ad tiers are newer “so it will take time for them to scale up”.

Can you see where we’re going with this? Music rightsholders have been exerting pressure in recent times for music services to increase their subscription prices – and in response they have. There hasn’t been much talk about blending ads and subscriptions, but perhaps Amazon’s move will nudge it onto the music industry’s agenda.

It may be hard to imagine, say, Spotify telling its basic-tier subscribers that they’re going to start hearing ads unless they pay $3 extra a month.

That said, with rumours that it will soon launch a more expensive ‘Supremium’ tier, there could be an opportunity to make that the ad-free version of Spotify, and introduce ads to the cheaper version. Plus don’t forget that paying Spotify users already hear ads within podcasts…

Alternatively, note that music services aren’t investing in the same level of original content – and now live sports – that services like Prime Video are. Without exclusives, there may be a bigger risk in adding advertising to your paid tier, if your rivals don’t.

Paid ad tiers may or may not work in music, but we sense a discussion of why they may (or may not) could be a useful addition to the debate around how our streaming economy evolves.

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Music Ally's Head of Insight