Ads are coming to Amazon Prime Video. Why are streaming companies turning to commercials?

Amazon’s Prime Video streaming service is set to introduce “limited advertisements” in films and TV shows starting from the end of January. If customers want to keep ad-free viewing, the company says they can but they will have to pay more. 

Europe will see the UK and Germany first in line for the scheme, with advertising starting as early as the first week of February. France, Italy, and Spain will follow later in the year. 

The move is aimed at “continuing to invest in compelling content”, Amazon said in a statement, insisting that the regular price of Prime membership will remain unchanged.

Netflix and Disney+ have introduced more affordable ad-supported streaming options to appeal to budget-conscious consumers. However, unlike the two rivals, Amazon’s ad-supported tier doesn’t come with a discounted rate; instead, customers will need to pay extra for an ad-free viewing experience.

Streaming services are facing difficulties to stay on top of their game and need additional income from advertisements and increased subscription fees to juggle the rising cost of content, licensing, and market competition-driven expansion.

Disney+ and other major traditional entertainment giants such as Warner Bros Discovery, Comcast, and Paramount have reported a combined loss from their streaming services of more than €4.5bn over the past year, despite raising prices in 2023, according to the Financial Times. 

Dave Simon, head of growth initiatives at Moloco, a US-based machine-learning-based advertising company, believes the advertainment strategy marks a significant shift for these companies, as they aim to change their initial business models.

“Most of the large content companies saw an opportunity to go direct-to-consumer, as opposed to going through their typical distribution points, the cable operators,” Simon told the BBC. “They all took a swing at building a business with subscription being the core revenue driver.” 

According to Simon, several mainstream companies have faced challenges in generating profits for an extended period with investors now seeking returns.

The cost of Amazon Prime differs across European countries, averaging around €55 per year.