Execs said in January that they’d probably hike the price of what had been a $79 a year service since it was introduced nine years ago. Even so, Amazon shares are up 2.4% in pre-market trading following today’s announcement about the service that offers members free, two-day delivery on many items bought on Amazon, as well as access to its streaming video service. Under the terms disclosed today, the price for new members and membership renewals for Amazon Prime will go to $99 while Amazon Student members pay $49. The company will keep its Prime Fresh fee at $299. CFO Tom Szkutak told analysts that Amazon was considering the price hike because “during this nine-year period shipping cost have gone up a lot, fuel cost have gone up a lot.” The famously tight-lipped company has disclosed little about the economics of its Prime membership. But Bernstein Research”s Carlos Kirjner estimates that the average member in the U.S. spends about $1,500 a year at the e-retailer vs about $550 for non-members. He figured that an increase of $20 a year or more would restore the economic model that Prime had when it was first launched, even if the higher price leads some to not sign up or renew. As a result, a change “should not be a major concern to investors.” Another analyst, Webush Securities’ Michael Pachter, estimates that Amazon has 25M Prime members and that attrition from a price increase would be “minimal.”
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