​Amazon Prime delivers nice revenue for 2016, doesn't cover net shipping costs yet

Amazon Prime is delivering strong subscription revenue for the e-commerce giant, but is getting closer to offsetting net shipping costs.
Written by Larry Dignan, Contributor

Amazon's Prime program, digital music, video, e-book and audiobook subscription revenue totaled $6.4 billion in revenue for 2016, up from $4.47 billion in 2015.

That category, detailed for the first time as retail subscription services, hints at how much money Amazon makes from its Prime subscriptions.

The catch? Even if you assume 100 percent of Amazon's retail subscription revenue is Prime the annual revenue tally doesn't cover the company's net shipping costs for the year.

Here's the comparison of Prime revenue and net shipping costs from Amazon's annual report, which was filed last week.


Now Prime isn't necessarily expected to drive a profit because it's a perk that delivers more sales. Prime subscribers spend more money on Amazon. Amazon investor relations chief Darin Manney said Amazon's fourth quarter unit growth of 24 percent was largely attributed to Prime. "Our unit growth has been strong, it's primarily attributable to our Prime program and the customers and members that enjoy that program," he said.

Also: Why Amazon is building its own air cargo network: Shipping costs are surging

Overall, you can see how Amazon can become more efficient and shave shipping costs while using Prime to offset expenses even more. If Amazon can cover its net shipping costs with Prime subscriptions the bottom line will be greatly improved. The wild card will be content and technology costs for Prime video and music.

Editorial standards