Amazon Prime Adds Food Delivery Incentive; What Industry Could Be Next?

Zinger Key Points
  • Amazon raised the price of Prime by $2 a month and $20 a year earlier this year, its first price increase since 2018.
  • Amazon has leveraged acquisitions and partnerships to increase the benefits for Prime subscribers over the years.

Ecommerce leader Amazon.com Inc AMZN has used a series of acquisitions and partnerships to boost the offering of its Amazon Prime subscription service. Here’s a look at some of the benefits Prime subscribers get and what may be coming down the road.

What Happened: Amazon announced a partnership with Grubhub Wednesday. The partnership will allow Amazon Prime members to get a free, one-year Grubhub+ membership and receive $0 delivery fees from restaurants on the Grubhub platform.

Grubhub+ normally costs $9.99 a month for the food delivery subscription service.

Under the terms of the partnership, Amazon is buying a 2% stake in Grubhub with warrants that give the company the option to acquire another 13% of the company.

The new feature continues to add to the benefits offered by having an Amazon Prime membership.

Launched in 2005, Amazon Prime includes benefits like free two-day delivery, television and movie streaming, music streaming, free games, unlimited photo storage and available books to read. Prime memberships also offer savings on pharmaceuticals at over 60,000 pharmacies including Walgreens Boots Alliance WBA and CVS Health CVS.

Amazon raised the price of its Prime membership earlier this year from $12.99 to $14.99 for a monthly subscription and the annual membership from $119 to $139. This was the first price increase for Amazon Prime since 2018.

As Amazon raises its prices and also competes with more companies offering subscription services, the company could continue to offer more deals and exclusives to lure in new customers and also retain existing subscribers.

Related Link: Amazon Q1 Earnings Highlights: Mixed Earnings, Lower Guidance Sends Stock Falling 

What Could Be Next: Amazon has used acquisitions to strengthen its offerings to Prime customers. This includes acquiring Whole Foods and Audible. The tech giant’s acquisition of movie and television studio MGM could boost the company’s offerings for Prime Video in the future.

Here are sectors and offerings Amazon could target to grow its Prime benefits:

Increased Gaming Perks: One area Amazon has seen growth in recently is its Amazon Games segment. The free-to-play online game “Lost Ark” was the second most played game of all time upon release on Steam and had over 20 million users.

A Prime membership comes with gaming perks like free games and a free subscription to Twitch. Amazon could go all in with its gaming growth plan and work on a partnership with companies like Sony Group Corp SONY or Microsoft Corporation MSFT for their monthly subscription offering or to get some games on the Amazon Games network.

Increase Sports Content: Amazon is among the streaming companies that are pushing forward with plans to grow through sports media rights deals. Amazon has “Thursday Night Football” coverage coming as part of an 11-year agreement starting with the 2022 NFL season. Amazon will likely bid on more sports content in the future.

Movie Theater Deals: With the MGM acquisition, Amazon could have lots of content available to stream for its Prime Video customers. With some blockbuster movies in the lineup, Amazon may also decide to show some of the movies in theaters. Amazon could seek out a partnership with a leading movie theater company like AMC Entertainment Holdings AMC or Cinemark Holdings CNK.

Amazon could make movies exclusive to certain chains and in return get benefits for its Prime customers like free movie passes or a movie theater subscription plan similar to MoviePass that some theaters offer.

Peloton Buyout or Partnership: Rumors came out earlier this year that Amazon was among the companies interested in buying connected fitness company Peloton Interactive PTON. With shares of Peloton down significantly from all-time highs and a market capitalization of $3.5 billion, Amazon may consider making a deal with the company and offering monthly fitness memberships a part of its Prime memberships.

Other Monthly Subscriptions: With rising inflation, consumers may continue to cut back on monthly bills. Part of cutbacks typically include items that are subscription based and have monthly fixed costs as the savings can be instantly recognized versus a pledge to spend less at the grocery store.

Amazon could seek to acquire or partner with monthly subscription offerings like meal kits, pet supplies, kids’ activity kits and wine clubs, and offer them for free to Prime members in exchange for equity in the company or by offering them at huge discounts to Prime members in a move to improve the value to the monthly or annual cost of a Prime membership.

Posted In: Amazon PrimeAmazon Prime DayFood DeliveryGrubHubMGMPrime Videostreaming platformsstreaming stocksNewsSmall CapTrading Ideas

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