It’s largely believed that Amazon barely breaks even, or at worst, actually loses money on each Kindle Fire device sold. Amazon’s strategy in that space is to make that money back via Amazon Prime subscriptions. But a new report from Bloomberg claims that the total number of Amazon Prime subscribers many be less than many initially anticipated.
Amazon.com Inc’s Prime service, a linchpin of its effort to keep customers loyal and fuel long- term profit, has attracted fewer than half as many members as analysts estimate, three people familiar with the matter said.
As of October, 3 million to 5 million people subscribed to Prime, a program begun in 2005 that provides two-day shipping for $79 a year, said the people, who asked not to be named because the figures are private. Amazon is working to reach 7 million to 10 million in the next 12 to 18 months, the people said. Analysts have pegged the current number at 10 million or more, with expectations for it to climb higher this year.
In an effort to boost subscribers and awareness about Amazon Prime, Amazon is offering free trials of Prime to new Kindle Fire owners. That will undoubtedly do quite a bit to boost Prime membership, but it remains to be seen if Amazon’s strategy will ultimately pay off when it comes to their bottom line. During the company’s holiday quarter, profits declined by an astounding 58%, even though revenue was up by 35% from the same quarter a year-ago.