When William Millsap learned that Amazon would run ads on his Prime streaming service unless he paid an additional $2.99 per month, he canceled his membership. A casual TV viewer, Millsap already has access to Netflix, Hulu and Max and says he's gone too long without commercials on his shows to turn back now. The company refunded most of its annual fee.
“I'm in a phase of my life right now where I'm trying to be mindful of what I'm doing, and constant interruptions just tire me out,” says Millsap, 66, a retired Episcopal priest in Reno, Nevada.
Amazon will begin showing the ads to all Prime Video users on Monday. For some viewers, it's another sign of the end of a streaming era. They are rethinking how many services they can pay for and how many ads they are willing to tolerate.
For years, streaming services distanced themselves from the peculiarities of cable television – high bills, an oversupply of low-quality shows and channels, constant advertising. In addition to ads, the abundance of content is back, “bundles” of different services are becoming standard, and paying for all the major options can easily rival cable TV in cost.
Most major streaming apps use advertising as another way to make money. Streaming companies claim that their ad-based options provide a budget-friendly way of watching while increasing the cost of their premium subscriptions. Apple TV is one of the few streaming services that does not yet offer third-party advertising.
Amazon's approach of making people pay more to get rid of ads could anger consumers. (Amazon founder Jeff Bezos owns The Washington Post.)
“They offer no value and just force advertising on consumers,” says Mike Proulx, research director at Forrester. “Consumers are effectively the losers in this move, and Amazon benefits from it.”
That's part of what angered Millsap, the former Prime subscriber.
“I think the worst business model is when we promise something and change the terms, and that's what Amazon appears to have done,” he said.
In a blog post announcing the change, Amazon said it was doing so to “continue to invest in compelling content and continue to grow those investments over a long period of time.”
Making good television costs money. In addition to full seasons of classic shows and reality content, streaming companies need a handful of big-budget hits to retain viewers. According to Variety, the first season of HBO's “House of the Dragon” cost the company less than $20 million per episode to produce. According to the Hollywood Reporter, Prime's The Lord of the Rings: The Rings of Power cost an estimated $465 million for the first season alone.
To cover costs, streaming companies have tinkered with subscription fees and other changes. Almost every streamer has recently increased their streaming fees without ads. Last May, Netflix began cracking down on account sharing in an attempt to convert some of the estimated 100 million people who watch without paying into revenue. Other companies are expected to follow his example.
“With the exception of Netflix, most of the other major streaming platforms are not yet profitable,” says Proulx. “They are forced to look for other sources of income and advertising is a long-standing business in the entertainment industry. It has been shown to work.”
It's not just streaming. Ads are making a comeback in other technology products that didn't start out that way. Uber uses its app to show ads to people waiting for or riding in its cars. TikTok's launch of TikTok Shop has given the app a mall-like feel, with a tab dedicated to selling random goods and videos of people selling things themselves, with worrying results. Even Amazon's Alexa voice assistant contains advertising.
Some streaming viewers have issues with the quality of the advertising and the fact that it hasn't changed much since cable TV. Streaming platforms may show fewer ads, so the same ones repeat – and their timing, especially for films, can seem random and confusing. Proulx says the streaming advertising industry is young and likely needs to find more ways to innovate, such as still images that appear when you press pause on a show.
There is a difference between streaming and the traditional TV advertising approach. According to Amazon, Prime will not show advertising in children's profiles or in children's content for the time being. Netflix also keeps advertising out of its children's profiles.
Luis Kapel and Sandra G. Bell pay the premium for all their streaming services to avoid advertising. The couple says they ditched cable TV in 2016 partly because they were tired of enduring the large amount of advertising they didn't like.
“There are advertisers who believe they can return to previous methods of increasing profits because they are failing to innovate in products and services that drive demand,” Luis Kapel said in an email. “And there are streaming services that have decided that subscriber satisfaction doesn’t matter, but billions of dollars in advertising will boost the bottom line.”
They decided to keep their Amazon Prime membership and pay the extra $2.99 per month to not see ads. They don't think streaming would be worth it if they had to sit through commercials again.
“We can make better use of our time,” Kapel said.