One specialist said the increase in production costs “doesn’t explain everything.”

Increase production costs Don’t explain everythingAccording to Julian Bilott, Ph.D. in economics and researcher at Inseec, “It’s also part of a more global strategy.” From Amazon, he says while the US platform Amazon is raising prices for its Prime subscription in five European countries, including France. in the United States of America, “The price increase nearly doubled in a few years” And the “It didn’t cause huge subscriptions to be cancelled.”, pointed out. for subscribers, “Value for money remains largely favorable to the services”according to him.

franceinfo: Do ​​Amazon’s arguments sound convincing to you?

Julian Bellot: It’s convincing, but it doesn’t explain everything. Amazon as a company suffers from rampant inflation today, especially in terms of delivery costs. We can also talk beyond the raw material fuels, the paper pulp that goes into making paperboard and paper, which are pretty intense in the Amazon model. It exploded +40% in two years, according to INSEE.

In fact, Amazon’s production costs are increasing and shifting part of the production costs to its subscribers, but besides this, it is also part of a more global strategy. Amazon is very aggressive about pricing so it can quickly conquer market share in every new country the company establishes itself in. Then, little by little, when the conditions are met, and when the offer becomes satisfactory, the company raises its prices by saying, in any case, they remain painless enough to keep subscribers in check despite everything and not satisfy enough subscribers to generate massive waves of unsubscribe . In the US, for example, Amazon Prime launched in 2005 at $79 per year. Today, we have $139 for a yearly subscription.

“In the United States, the price hike almost doubled in a few years, and this did not cause huge subscription cancellations, but on the contrary.”

Julian Bellot, Doctor of Economics and Educator-Researcher at Inseec

in franceinfo

How do we explain price differences by country?

Amazon, as a technology company, uses pricing software to set prices based on what it feels subscribers will be willing to pay. The willingness to pay subscribers in France, for example, is not exactly the same as in the United States or Great Britain, and therefore pricing levels, but also the increase in prices that can be distinguished from one country to another. Not to mention one thing that the level of service is not quite the same either. You have services, for example on Amazon Prime in the US, which are not in France. There’s Amazon now, the ability to ship in an hour or two. The Amazon key allows it to be delivered in his garage or directly at his home or sometimes in his car. All these services do not exist in Europe, especially in France. So, the available Amazon Prime Video catalog is not exactly the same depending on which country you reside in.

Does the platform risk facing huge subscription cancellations?

40% increase in annual subscription, meaning that you will have to have more than 40% of subscribers in volume opting out for it to be costly for Amazon in the end. Of course, that probably won’t happen. Amazon had to run the prediction models internally to make sure that didn’t happen.

“We know approximately the number of Amazon Prime subscribers, which today exceeds 200 million.”

Julian Bellot, Doctor of Economics and Educator-Researcher at Inseec

in franceinfo

We’re talking about a service that’s starting to get a certain age and has experienced several successive waves of price increases. The number of subscribers continues to grow, which means that overall and in an aggregate way, we still have value for money that remains largely favorable for the services. In any case, it is perceived as such by the majority of consumers.

In general, is the future of these platforms to increase prices?

You should still be able to do this. The more competitive Amazon’s offering is, the greater the chance for Amazon to be able to increase its prices to a certain extent, of course. There is also another aspect to consider; It’s operating costs. Service operating and production costs that correspond to the level of service provided by Amazon. Amazon Prime Video did not exist a few years ago in France. Amazon decided to join the Prime Video service to Amazon Prime, at no additional cost to the subscriber, but on the other hand, it has a production cost for Amazon. The more diverse we have a service and the more qualitatively offered it is to that level of service, the higher the production costs, and at some point, Amazon makes the decision to pass on a whole part of it to consumers. When you put $500 million on the table to be able to make a series based on The Lord of the Rings, which will be called “The Rings of Power” and soon be releasing on our screens, obviously at some point, you simply have to be able to get a payout. on investment and this also includes price increases.

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