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Amazon Prime Video Uses AWS to Deliver Solid Streaming Experience to More Than 18 Million Football Fans

About Amazon Prime Video

Amazon Prime Video , part of the Amazon Video on-demand internet video service, provides a selection of original content and licensed movies and TV shows that can be streamed or downloaded as part of the Amazon Prime subscription.

Services Used

• Amazon CloudFront
• Amazon DynamoDB
• AWS Elemental
• Amazon Kinesis
•  Amazon OpenSearch Service

Benefits of AWS

• Reliably delivers uninterrupted live football games to 18.4 million football fans
• Ensures high availability, scalability, and low latency
• Helps advertisers optimize ad performance

Searching for the Right Sports-Streaming Solution

When Amazon Prime Video won the rights to stream NFL Thursday Night Football games in more than 200 countries, it knew it needed to provide the best possible experience for millions of fans watching their favorite teams. “With live sporting events, reliability and low latency are absolutely critical because every lost second negatively impacts viewers,” explains BA Winston, the global head of digital video playback and delivery for Amazon Video. “If there are any interruptions or buffering, the fans won’t watch.”

On top of that challenge, Amazon Prime Video had to make sure it could easily and quickly support large spikes in user traffic. “Although we have several mechanisms to forecast demand, we cannot be completely accurate,” says Winston. “Therefore, we needed to do sufficient scale testing and have an architecture that can quickly scale, handle spikes, and have sufficient caching in different layers to manage the demand."

The organization also needed to offer targeted advertising during games and be able to track ad data so that advertisers could gauge how effectively ads were performing.

Enabling Live Video Streaming and Ad Insertion on AWS

Amazon Prime Video uses the Amazon Web Service (AWS) Cloud as the underlying technology for all its services. “AWS gives us the flexibility, elasticity, and reliability we require,” Winston says. Amazon Video also selected AWS Elemental , an Amazon Web Services company that combines deep video expertise with the power and scale of the cloud to empower media companies to deliver premium video experiences to consumers. “Amazon Video was already using AWS Elemental Cloud for live encoding and packaging for several live linear channels,” Winston says. The organization began using AWS Elemental for live encoding, packaging, and ad insertion for Thursday Night Football.

Over the course of 11 games during the 2017 NFL season, Amazon Prime Video sent live game broadcasts through six AWS regions and AWS Elemental. These services include AWS Elemental MediaTailor , which is used to monetize video content through the insertion of targeted advertising. “Previously, we were not doing ad insertion,” says Winston. “We learned about AWS Elemental MediaTailor before it was officially launched. We analyzed it, validated it for all our use cases, and tested it across a range of devices, and we used it for all the Thursday Night Football games."

Using Amazon DynamoDB to Optimize Scalability and Performance

A key component of MediaTailor is Amazon DynamoDB , which Amazon Prime Video uses as the key value store for the streaming platform. “We rely heavily on Amazon DynamoDB for high scalability and performance,” says Alex Zhang, a principal product manager for the AWS Elemental team. “During a four-hour game, there are many customers viewing concurrently, so we need to be able to quickly write to and read from a highly scalable back-end database—Amazon DynamoDB is that database. For example, when more than 300,000 video clients started polling for ad pods and configuration data simultaneously every time a commercial break hit, we immediately noticed that the application was experiencing peak demand exceeding what the DynamoDB tables in multiple regions were configured to support on a per-second basis. By adjusting the configuration in the DynamoDB console, we were able to quickly double the number of storage partitions allocated to the impacted tables, increasing the burst-through capability of the system and eliminating client API errors. DynamoDB routinely executes these types of seamless, on-demand scale operations thousands of times every day across millions of customer tables.”

The Thursday Night Football platform takes advantage of additional AWS services, including Amazon CloudFront for delivering video with low latency to a global viewership, and Amazon Elastic Compute Cloud (Amazon EC2) for managing compute capacity. Zhang says, “We worked very closely with the compute team to provision capacity that can elastically scale for such a global audience.”

Reliably Streaming Live Football to 18.4 Million Fans Worldwide

With its cloud-based video-streaming platform, powered by AWS and AWS Elemental, Amazon Prime Video streamed 11 NFL games to a total of 18.4 million football fans in 224 countries and territories across the globe during the 2017 NFL regular season. Fans watched the games via the Amazon Prime Video app on more than 600 types of TVs, mobile devices, game consoles, set-top boxes, and connected devices. The average-minute audience (AMA) watching games for at least 30 seconds was more than 310,000, with those viewers watching an average of 63 minutes per game. Amazon Prime Video offered its own live commentary in three languages and streamed live commentary from the broadcaster in US English.

“Using the AWS Cloud, we were able to easily stand up instances across multiple regions worldwide,” says Winston. “We provided a highly redundant, low-latency, scalable, live sports-streaming solution to NFL fans all over the world because of the elasticity and flexibility of AWS. That redundancy, performance, and scalability also resulted in high reliability, which translated into a great viewing experience for people watching games throughout the season.”

Ensuring a Seamless Playback Experience

Amazon Prime Video measured the fan viewing experience by using video-stream metrics. “We paid close attention to the reliability of the video stream, which we continually optimized in real-time to provide the best experience for our customers worldwide,” Winston states. “We tracked those metrics by device and geography, looking at the viewing experience during each game. For some devices, we found the latency was comparable and in some cases better than broadcast or cable channel playback, even with ads inserted.”

The organization used Amazon Kinesis and  Amazon OpenSearch Service to provide a seamless playback experience to its customers. Amazon Kinesis delivers the video stream data to Amazon OpenSearch Services for application monitoring and faster data forensic analysis. With  Amazon OpenSearch Service, the organization was able to aggregate, analyze, and visualize petabytes of data, allowing it to get real-time insights into the application and find and fix streaming issues instantly.

“We collected a significant amount of data around quality of service, which is the experience viewers have on their devices,” says Winston. “That information was sent to  Amazon OpenSearch Service, and we used it to further optimize the overall playback experience in real-time.”

Amazon Prime Video used AWS Elemental MediaTailor to insert ads in real time, based on which region viewers were in. Amazon Video also used Amazon Kinesis as part of its infrastructure to collect quality-of-service metrics from devices worldwide. “We used MediaTailor to surface ad-viewing data to Amazon Video systems, which then reported the data to advertising partners,” Zhang says. “Getting the right data to the right partner is critical to facilitate accurate ad reporting.”

After a successful experience streaming NFL games, Amazon Prime Video streamed the inaugural Next Gen ATP Finals in November 2017 and recently launched CBS All Access, which gives Amazon Prime Video subscribers access to hundreds of live local channels across the United States. Winston says, “We have a lot of confidence in the AWS Cloud and AWS Elemental, and we look forward to using these technologies to broaden our reach in the future.”

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A Comparative Analysis of Over-the-Top Platforms: Amazon Prime Video and Netflix

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• Advait Lad 13 ,
• Shivani Butala 13 &
• Pramod Bide 13  

Part of the book series: Lecture Notes in Networks and Systems ((LNNS,volume 120))

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The rise of online video streaming has led to tough competition among several over-the-top (OTT) platforms to capture the viewer’s attention. Even though platforms like Netflix and Amazon Prime Video are similar in terms of amount of library content and user base, they differ in the payment structure, overall user experience and the catalogue available. Netflix has better device compatibility, a wider yet volatile catalogue, better user experience and audio, whereas Amazon Prime Video is cheaper and has more options for live TV and extras along with fresh content. In this paper, a comprehensive study is performed to compare Netflix and Amazon Prime Video on the basis of several parameters like user preference, the total annual revenue, the number of subscribers, budget and the amount of original content and to determine which OTT platform has managed to win the battle of entertainment.

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Department of Computer Engineering, Sardar Patel Institute of Technology, Andheri (West), Mumbai, 400059, India

Advait Lad, Shivani Butala & Pramod Bide

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Jagdish Chand Bansal

Swami Keshvanand Institute of Technology, Management & Gramothan, Jaipur, Rajasthan, India

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Indian Institute of Information Technology, MNIT Campus, Jaipur, Rajasthan, India

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Lad, A., Butala, S., Bide, P. (2020). A Comparative Analysis of Over-the-Top Platforms: Amazon Prime Video and Netflix. In: Bansal, J., Gupta, M., Sharma, H., Agarwal, B. (eds) Communication and Intelligent Systems. ICCIS 2019. Lecture Notes in Networks and Systems, vol 120. Springer, Singapore. https://doi.org/10.1007/978-981-15-3325-9_22

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Scaling up the Prime Video audio/video monitoring service and reducing costs by 90%

The move from a distributed microservices architecture to a monolith application helped achieve higher scale, resilience, and reduce costs..

At Prime Video, we offer thousands of live streams to our customers. To ensure that customers seamlessly receive content, Prime Video set up a tool to monitor every stream viewed by customers. This tool allows us to automatically identify perceptual quality issues (for example, block corruption or audio/video sync problems) and trigger a process to fix them.

Our Video Quality Analysis (VQA) team at Prime Video already owned a tool for audio/video quality inspection, but we never intended nor designed it to run at high scale (our target was to monitor thousands of concurrent streams and grow that number over time). While onboarding more streams to the service, we noticed that running the infrastructure at a high scale was very expensive. We also noticed scaling bottlenecks that prevented us from monitoring thousands of streams. So, we took a step back and revisited the architecture of the existing service, focusing on the cost and scaling bottlenecks.

The initial version of our service consisted of distributed components that were orchestrated by AWS Step Functions . The two most expensive operations in terms of cost were the orchestration workflow and when data passed between distributed components. To address this, we moved all components into a single process to keep the data transfer within the process memory, which also simplified the orchestration logic. Because we compiled all the operations into a single process, we could rely on scalable Amazon Elastic Compute Cloud (Amazon EC2) and Amazon Elastic Container Service (Amazon ECS) instances for the deployment.

Distributed systems overhead

Our service consists of three major components. The media converter converts input audio/video streams to frames or decrypted audio buffers that are sent to detectors. Defect detectors execute algorithms that analyze frames and audio buffers in real-time looking for defects (such as video freeze, block corruption, or audio/video synchronization problems) and send real-time notifications whenever a defect is found. For more information about this topic, see our How Prime Video uses machine learning to ensure video quality article. The third component provides orchestration that controls the flow in the service.

We designed our initial solution as a distributed system using serverless components (for example, AWS Step Functions or AWS Lambda ), which was a good choice for building the service quickly. In theory, this would allow us to scale each service component independently. However, the way we used some components caused us to hit a hard scaling limit at around 5% of the expected load. Also, the overall cost of all the building blocks was too high to accept the solution at a large scale.

The following diagram shows the serverless architecture of our service.

The initial architecture of our defect detection system.

The main scaling bottleneck in the architecture was the orchestration management that was implemented using AWS Step Functions. Our service performed multiple state transitions for every second of the stream, so we quickly reached account limits. Besides that, AWS Step Functions charges users per state transition.

The second cost problem we discovered was about the way we were passing video frames (images) around different components. To reduce computationally expensive video conversion jobs, we built a microservice that splits videos into frames and temporarily uploads images to an Amazon Simple Storage Service (Amazon S3) bucket. Defect detectors (where each of them also runs as a separate microservice) then download images and processed it concurrently using AWS Lambda. However, the high number of Tier-1 calls to the S3 bucket was expensive.

From distributed microservices to a monolith application

To address the bottlenecks, we initially considered fixing problems separately to reduce cost and increase scaling capabilities. We experimented and took a bold decision: we decided to rearchitect our infrastructure.

We realized that distributed approach wasn’t bringing a lot of benefits in our specific use case, so we packed all of the components into a single process. This eliminated the need for the S3 bucket as the intermediate storage for video frames because our data transfer now happened in the memory. We also implemented orchestration that controls components within a single instance.

The following diagram shows the architecture of the system after migrating to the monolith.

The updated architecture for monitoring a system with all components running inside a single Amazon ECS task.

Conceptually, the high-level architecture remained the same. We still have exactly the same components as we had in the initial design (media conversion, detectors, or orchestration). This allowed us to reuse a lot of code and quickly migrate to a new architecture.

In the initial design, we could scale several detectors horizontally, as each of them ran as a separate microservice (so adding a new detector required creating a new microservice and plug it in to the orchestration). However, in our new approach the number of detectors only scale vertically because they all run within the same instance. Our team regularly adds more detectors to the service and we already exceeded the capacity of a single instance. To overcome this problem, we cloned the service multiple times, parametrizing each copy with a different subset of detectors. We also implemented a lightweight orchestration layer to distribute customer requests.

The following diagram shows our solution for deploying detectors when the capacity of a single instance is exceeded.

Our approach for deploying more detectors to the service.

Results and takeaways

Microservices and serverless components are tools that do work at high scale, but whether to use them over monolith has to be made on a case-by-case basis.

Moving our service to a monolith reduced our infrastructure cost by over 90%. It also increased our scaling capabilities. Today, we’re able to handle thousands of streams and we still have capacity to scale the service even further. Moving the solution to Amazon EC2 and Amazon ECS also allowed us to use the Amazon EC2 compute saving plans that will help drive costs down even further.

Some decisions we’ve taken are not obvious but they resulted in significant improvements. For example, we replicated a computationally expensive media conversion process and placed it closer to the detectors. Whereas running media conversion once and caching its outcome might be considered to be a cheaper option, we found this not be a cost-effective approach.

The changes we’ve made allow Prime Video to monitor all streams viewed by our customers and not just the ones with the highest number of viewers. This approach results in even higher quality and an even better customer experience.

“All-Inclusive” business model of Amazon Prime

‘Amazon Prime’ has now become a household name. Every home that I know of has at least one Prime membership. We’ve all used a relative’s or a friend’s Prime membership to get something delivered within two days of placing an order. That’s the kind of hold Amazon Prime has had on our lives in the past decade, showing us how much we value convenience and ease as human beings. 

Amazon Prime has become the largest and most lucrative subscription model on Earth, consisting of Free Shipping (same-day, 2-day, or 2hour delivery), Prime Video, Prime Reading, Prime Music, Gaming, attractive discounts & the list goes on. It’s a one-way ticket to access all the perks Amazon has to offer with the largest selection of products and services. Amazon Prime has designed such a business model that it covers the entire gamut of services its users use in their daily lives.

With 200 Million Prime members across 20 countries , 148Million are present in its home country alone (USA) and still expanding globally. This is the impact Amazon has made with its subscription service ever since it was launched in 2005, only offering a free 2-day shipping service back then. 

But the core idea of the Amazon Prime business model began in 2002, known as  FastTrack  – to speed up order processing and reduce shipment time. FastTrack is a key performance metric for vendors that measures the percent of customers that see an item as  Prime Eligible. 

This metric is used by third-party sellers who take up 56% of Amazon’s marketplace when they sell their products on Amazon taking into account an item’s in-stock rate and conditions in which an item arrives at Amazon’s fulfillment center. The higher a seller’s fast-track rate, the more number of items are seen as Prime Eligible. 

FYI: In 2020, the e-commerce giant generated approximately 80.5 billion dollars in third-party seller services, an increase of nearly 50 percent over the previous year.

Jeff Bezos (the richest man currently exploring outer space) has always been a visionary. He didn’t want Amazon Prime to be just any other subscription service. He wanted to design Amazon Prime’s business model in such a way that it becomes a critical way of “locking” in customers into Amazon’s ecosystem of products and services. 

Various stakeholders were nervous about implementing the Amazon Prime business model, as Shipping Revenue was a part of the profit margin when goods were sold. But Jeff was well aware of the short-term losses. He didn’t seem surprised and asked the team to stay firm on their plans. He had calculated Prime Subscription’s long-term success instead of focusing on the ‘quarter-by-quarter game.’ As mentioned in his open letter to the world: 

Jeff’s vision turned out to be accurate. Prime Members end up spending more than double compared to non-members on an annual basis. This also gives Amazon a chance to analyze predictable revenue streams from each Prime member by tracking their behavioral and shopping patterns. In 2018, the company earned an estimated $232 billion in retail commerce. And it’s all thanks to its customer base. The average Amazon customer spends about $600 a year on the site. And Prime members? They spend $1,400 each. 133% higher. Wow!!

#JeffBezos has turned every cost centre into a revenue center. He grabbed the opportunity at the right time by analysing own business. #Amazon #Business pic.twitter.com/BfcfFmDeah — Akshay Munot (@AkshayMunot_) August 19, 2020

Amazon announced its final quarter results of 2020, stating that Net Sales were $89Billion during the pandemic. Out of which its sales of all subscription services, including Amazon Prime-related membership fees, digital video, audiobooks, e-books, and other subscription services was $25.21 billion in 2020 (excluding AWS).

Prime Day Sale

To commemorate the Amazon website’s 20th Birthday, Prime Day was launched in 2015, an annual event only for prime members wherein heavy discounts was applied on all products & services. It was the new “Black Friday Sale.” More than 250 million items were purchased during this 48-hour event in 2021 amid a pandemic, and sales for Prime day sky-rocketed to $11.19 Billion this year. 

Gamut of Services in the business model of Amazon Prime

Prime video.

The video streaming service hosts many movies and TV shows, including exclusive networks like HBO, CBS All Access, and Amazon’s own Prime Originals. Amazon owns the IMDB database, offering access to cast information, trivia, and behind-the-scenes stories. 

Amazon’s recent acquisition of Metro Goldwyn Mayer (MGM) for a blinding $8.5Billion , would just let Amazon make as many James Bond sequels as it likes with access to MGM’s intellectual property, not forgetting a century’s worth of classic movies and TV shows. Prime Video is known to be the second most popular reason for subscribing to Prime Membership.

Prime Music

The music streaming service is stocked with more than 2000 playlists/stations and 2 million songs. So-called ‘Amazon Music Experts create these playlists.’ 

Amazon’s Choice & Free Shipping

The eye-catching label – Amazon’s Choice is applicable on products valued for money spent based on– high ratings, a low return rate, competitive prices, and frequently bought by customers. The search for a sofa can lead to thousands of options leading to confusion. 

Amazon's Choice makes shopping for your off to college checklist easy! Check out our Electronics Gift Guide here: https://t.co/m9KBMidPOu pic.twitter.com/OYV12KjVeP — Amazon (@amazon) August 19, 2017

This helps Prime customers save time from going through the same product offered by hundreds of sellers with differing qualities and prices. Amazon’s Choice is exclusively available for Prime Members only. 

Free shipping was the core service offered during Prime’s inception, and it continues to be an integral part of Prime.

Prime Reading

A library including best-sellers, magazines, comics, and popular reads from trustworthy publishing houses, which can be borrowed for free with Audible narration. All titles for readers are hand-picked by editors. 

JUST LAUNCHED: Prime Reading! Read as much as you want from hundreds of eligible eBooks, comics and more (T&Cs Apply.) Learn More: https://t.co/fnDxXeWg83 #PrimeReading #ReadAnytimeAnywhere #AmazonKindle pic.twitter.com/8NJIneM8H6 — Amazon Kindle India (@KindleIndia) September 25, 2018

Prime Gaming

It gives access to tons of exclusive video games with “free forever” games to select each month. It used to be called Twitch Prime (before Amazon acquired Twitch for US$970 million in an all-cash deal ). 

Combining all these attractive content services with something as simple as free shipping and easy returns has posed an unfair advantage against competitors. 

Fred Wilson of Union Square Ventures recently  expressed concerns  for the same:

I worry Amazon has an almost unfair advantage in the content business because of Prime. It’s the craziest thing ever. Who would have ever thought shipping physical products to people at a loss would become this incredible competitive moat in the television business? Who dreamt that up? I happen to believe that it’s an accident that Bezos woke up one day and said, ‘Wow, actually we can take Prime, and we can use that revenue to subsidize our way into the content business.’ But honestly, if you’re a Prime subscriber, it doesn’t cost you any more to get their TV. And I have to come out of pocket with Netflix. If you’re only going to have one, which one are you going to have? People who don’t have hundreds of dollars a month to spend on entertainment might choose just one [entertainment provider], and Amazon might be the one they choose because they’re already Prime. They have to buy their groceries anyway. It’s just this incredible bundle.

The other side of the spectrum: Prime for Sellers 

Little does everyone know that a subscription service exists not just for Shoppers but also for first/third-party Sellers and Business Owners. They promote their products on the platform –  Amazon Business Prime.

Business Prime is here! Our annual membership program offers Amazon Business customers new benefits that help simplify the procurement experience. Find out more at: https://t.co/TkgTUW5YcD pic.twitter.com/NG0HDAlC2B — Amazon Business (@AmazonBusiness) October 24, 2018

This particular subscription service has a different set of perks and is “strictly business,” so much so that it doesn’t include Prime Video membership. The perks offered are: 

• creating logins for business employees
• Opening an Amazon Corporate Credit Line
• Amazon WorkDocs to collaborate on invoices, receipts, etc. 
• Free Business Analytical tool for owners to track product spends, monitor sales, etc.
• Creating approval procedures & applying spending caps for purchases.
• Small businesses can apply & qualify for Tax Exemptions.
• Use Fulfillment by Amazon (FBA) to ship products to an Amazon fulfillment center/warehouse and letting Amazon take care of the storage, packing, shipping, returns, refunds, and customer service for you. Now that’s fulfilling. 

This proved to be a win-win situation for both parties easing business owners’ responsibilities and providing seamless delivery of products by Amazon Prime. Some sellers built their business from scratch just by selling their products on Amazon, and now there are hundreds of YouTube tutorials on how to become a successful Amazon seller. Thanks to FBA. 

The registration process for Business Prime is strict. It verifies the business’s credentials and history before offering the subscription by asking for the business address, email, and Tax ID. Amazon also partners with Forrester Consulting to analyze the potential ROI for the business if it is offered a subscription. The subscription cost for a business ranges from $69/user to $10,099 for unlimited users per year.

Competition

There are various other retailers, both small and large, which offer subscription services to customers. Amazon competes with these retailers head-to-head for market share but has successfully captured most of it in recent years. Some of the rivals are Target, Walmart, Costco & BestBuy when it comes to retail stores. The rivals in the subscription services field are Alibaba (AliExpress), Flipkart, Netflix, Apple, and Google. 

When third-party vendors promote & sell their products on the Amazon platform, vendors pay a commission fee and other related fulfillment costs, contributing to sales and profit. Jeff Bezos has stated that their main competitor is eBay when it comes to subsequent party sellers. 

Given the rise of the middle-class sector in India and increased spending, it has become one of the most significant growth markets. Amazon was launched in India in 2016 and has been exceptionally successfully competing with the other local giants like Flipkart and Myntra. 

The E-commerce business in India has been fierce, with many local and foreign companies trying to gain market share. In 2017, Amazon India was the leading online marketplace with over $500 Million in sales. It has now become one of India’s  top 5 E-commerce platforms with close to $10Billion in sales.  

On a global platform, Alibaba, with its e-commerce platform AliExpress managed to eradicate the Amazon China store after 15years of existence in the communist country. 

The older and experienced retailers such as Walmart or Sears could not cope with Amazon’s quick take-over of the market with advanced technology and expertise.

Recently Amazon outsold Walmart for the first time a week ago, making Amazon the biggest retailer outside China. It also marks the first time Walmart has been outsold since it became the biggest US Retailer in 1990. This shows us the kind of competition Amazon is taking over and might soon become a monopoly in the near future. 

Way Forward

It’s no secret that Amazon has come through COVID-19 with enormous success. However, the corporation has been widely criticized for the carbon emissions resulting from Amazon’s delivery services, lack of protective measures for its colored/immigrant workers, and tax avoidance.

Bezos, too, has often come under fire for his lack of accountability and duty to the world from which he profits. Like every other large conglomerate, Amazon has faced criticism over the years and yet persists in being a part of our daily lives, offering top-class services that didn’t exist even 20 years ago. 

With Jeff Bezos’ latest project – Blue Origin, the sky is the limit, which was demonstrated by Jeff going past the Kármán line in New Shepard, a reusable suborbital rocket system developed by Blue Origin. It’ll take less than 20 years for space tourism to become affordable to the middle-class; until then, it’s something only the super-rich can afford. And that can be an excellent opportunity for Amazon Prime. 

A new business model like, ‘Purchase an Amazon Prime membership for the next 20 years and get a 50% discount on your trip to space!’ This could be Amazon’s new mantra to continue holding its Number One spot as the most valuable brand on Earth. 

2021’s #KantarBrandZ Most Valuable Global Brand is @Amazon . Its brand value has increased by 64% to US$684bn. @amazon and @Apple are the first brands ever in our ranking to be worth more than US$½trillion. Read the full story here: https://t.co/9n1vM6WspP pic.twitter.com/XQXLhSDJlZ — Kantar (@Kantar) June 21, 2021

-AMAZONPOLLY-ONLYWORDS-START-

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-AMAZONPOLLY-ONLYWORDS-END-

An Engineering grad, currently working in the fields of Big Data & Business Intelligence. Apart from being immersed in Tech, I love writing and exploring the business world with a focus on Strategy Consulting. An ardent reader of Sci-Fi, Mystery, and thriller novels. On my days off, I would spend time swimming, sketching, or planning my next trip to an unexplored location!

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14.7: Case study - Amazon Prime

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One-line summary

Amazon Prime has become one of the largest and best loyalty programmes in recent years, despite not using point systems and oversimplified projections of loyalty. They provide consumers real value by addressing their needs for instant gratification and exclusivity, while streamlining the customer experience and seeing a substantial financial return for the company.

The problem

Amazon noticed that shipping was often a stumbling block when it came to completing purchases. If shipping took too long, users would drop out of the purchase. Similarly, if users purchased an item that was less than the minimum to receive free shipping they would also abandon the purchase. They needed to somehow streamline this process, so that customers would complete their purchases.

They considered a loyalty program that would address these two aspects, but knew that customers are inundated with loyalty programmes that offer cash-backs and promotions. Every retailer, bank and service provider all provide some form of loyalty programme that is very similar to all the others.

Amazon noted that many loyalty programmes fail because they don’t meet the needs of the customer and promise delayed gratification. They offer customers nothing new nor anything they can derive any real benefit from in the short term. Customers have to build up points and cashbacks and wait to receive their reward. Many customers have become wary of loyalty programs, and see them as just another way to extort more money from consumers.

Customers need something that offer real benefits, and that they are willing to pay US$ 99 a year for. They want real value immediately and not something they need to wait months or years to see any benefit from.

The solution

Amazon Prime provides its customers with what they really want and need from the brand. It has created a program that is designed to meet customer’s need for instant gratification and removed the stumbling blocks in the purchase process. Prime members receive next day delivery on all items, and do not need any minimum value in their shopping carts to receive free shipping. They reap the benefits of the program immediately and every time they shop online.

Instead of making these shipping features free, Amazon Prime made the service part of an exclusive loyalty programme that users had to pay a yearly fee to benefit from. So, in addition to tapping into instant gratification, Amazon Prime also made use of customers’ want to be involved in something exclusive, that would set them apart from general customers. As well as shipping benefits, Amazon Prime users would get access to exclusive deals and discounts, as well as first option on new products. Prime members get to see and purchase products before they are made available to other customers.

To ensure they provided perceived real value, Amazon also included access to their entire library of Amazon Prime videos in the Prime membership. Although the fledging library cannot rival Netflix, offering the content free enables it to gain an audience to test out content and gain insights for future content development. This means that the customer receives great value in the form of online viewing content, and the brand gains invaluable input that it can use to fuel further development.

Amazon Prime is more than a loyalty or a rewards program, it is a privilege program that taps into customers’ need for feeling important and special, as well as addressing stumbling blocks in the purchase process, and meeting our growing need for instant reward (YourStory, 2017).

The results

Amazon has created a truly extraordinary loyalty programme that users are prepared to pay for. By providing customers with what they need and streamlining the customer experience, Amazon has demonstrated that gimmicks and cash backs are not the solution for loyalty programmes. Amazon Prime saw rapid adoption in the US, and still sees a 40% increase in subscriptions year on year even though the loyalty program is nearly 12 years old. As of early 2017, 60% of Amazon’s US customers have a Prime membership, with the total number of Prime subscribers hitting 80 million. Prime members also spend nearly double (US$ 1 300) what non-Prime members do (US$ 700) per year (Business Insider, 2017). The programme has been a huge success for the brand, with revenue from Prime alone making up US$ 6.4 billion in 2016. The programme is so successful that revenue from subscriptions alone is nearly enough to cover the largest cost of the company, its overall shipping costs (Bloomberg, 2017).

Essentially, establishing customer loyalty is about providing users with an experience that is simply better than anything else, so that users change their purchase behaviour to favouring your brand. And that is exactly what Amazon has been able to achieve through Prime (LooseThreads, 2017).

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A Case Study on Amazon Prime Video

Added on   2021-08-30

   Added on  2021-08-30

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Reporting by Blake Brittain in Washington; Editing by Christopher Cushing and Sonali Paul

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Blake Brittain reports on intellectual property law, including patents, trademarks, copyrights and trade secrets, for Reuters Legal. He has previously written for Bloomberg Law and Thomson Reuters Practical Law and practiced as an attorney.

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