Image: The Boys, Amazon Prime Video
Amazon and Apple, two tech giants that have become major players in the entertainment industry by way of their streaming platforms reported earnings this week. While these two companies do not break out metrics from their video streaming divisions, Parrot Analytics’ Streaming Metrics can provide insight into the black boxes of the performances for both streaming services.
Specifically, Prime Video and Apple TV+ present an interesting case study in how platforms can squeeze more revenue from their subscribers using different tactics. Both Apple TV+ and Amazon Prime Video have seen significant ARPU (Average Revenue per User) gains in the last year, led by pricing changes and hit seasons of flagship shows like “Ted Lasso” and “The Boys.” The tactics from both platforms — a price hike and introducing ads — increased ARPU and revenue for these platforms but reduced subscribers in the short term.
We can put a number on the impacts of these moves. Amazon Prime Video introduced ads to its platform in January 2024 with the option to pay $2.99/mo. to watch ad-free. Our model estimates that there was a dip in Amazon Prime Video users in the UCAN region when ads were introduced in Q1 2024 (71.6M in Q1 2024 vs. 72.1M in Q4 2023). There was also a slight uptick in churn this quarter (6.3% in Q1 2024 vs. 5.9% in Q4 2023). Note this estimate is the number of Amazon Prime subscribers using Prime Video.
The short term impacts of the addition of ads to Prime Video appear to have increased churn and reduced the number of users in the quarter these changes were implemented. However by Q2 2024 both these measures had rebounded and reached record levels for the platform suggesting that the downside impacts of this change were short lived and have not altered the trajectory of Prime Video’s user growth and improving churn rate. The positive moves in these financial metrics combined with a growing market share for Prime Video’s original content paint a positive growth story for the platform.
A similar pattern played out for Apple TV+ following the platform’s price increase last year (from $6.99 to $9.99/mo. in October 2023). The platform saw a temporary drop in the number of subscribers and an increase in churn for the quarter in UCAN. However, it should be noted that there was a much larger jump in the churn rate for Apple TV+ (to 10.21%) and, as of Q2 2024, this metric has not dropped back down to the level it was before the price increase.
So both tactics - a price hike and introducing ads - increased ARPU for these platforms but reduced subscribers in the short term. How does this net out when we consider revenue? Both platforms saw a significant jump in our estimated revenue the quarter they implemented the change. Apple TV+ saw a 33% jump in quarterly revenue in UCAN in Q4 2023 after its price hike. Amazon Prime Video saw a 19.2% increase in revenue after introducing ads with the option to pay for ad-free at the beginning of the year.
Our revenue estimates for Apple TV+ show how it has carved out an increasing share of Apple’s total global services revenue, more than doubling its share from the platform’s launch in Q4 2019 to Q2 2024 (Apple’s Q3 2024). In the quarter ending in June, Apple’s services generated a record $24.2 billion in revenue.
Before declaring Apple TV+ and its strategy of a straightforward price hike the clear winner here it is important to remember that Amazon Prime has multiple proven ways to monetize its subscribers so keeping them around and active in the broader Amazon ecosystem is a key consideration. The introduction of ads to Prime Video boosted revenue while having a smaller churn impact compared to Apple TV+’s price increase. While the 43% price increase for Apple TV+ led to a substantial churn event, it helped the platform better monetize these subscribers like a traditional SVOD business model and resulted in a substantial jump in revenue. Both platforms appear to have effectively boosted revenue in ways tailored to their respective business models.
