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Amazon.com, Inc. (AMZN) Is Cutting Prime Benefits Back to Boost Profit

Amazon.com, Inc. NASDAQ:AMZN

Amazon.com, Inc.  is finally limiting the number of people who can share a single Amazon Prime account. Moving forward, new subscribers can only share their Prime account with one other adult. Simply put: you can no longer split free two-day shipping with your friends.

Amazon NASDAQ:AMZN

Amazon cuts sharing down

Indeed, $99 per year to access Prime is a great deal for millions of subscribers. In addition to free shipping, you can access a wealth of content and take advantage of savings. Many customers decided to share the account rather than getting one of themselves. This changed beginning Friday.

Called “Amazon Households,” you can share your account with one other adult and up to four children.

Under the old system, the only other benefit another person could attain from the primary account holder was free two-day shipping. Under the new model, both adults can receive shipping benefits, Prime Early Access, Prime Instant Video and Kindle benefits.

Moreover, each adult account holder must authorize each other’s use of credit and debit cards on file for purchases on Amazon . Also, each account can keep their own payment methods, but you can view and use the other person’s card(s).

Previously, people shared Prime without having to share login and card details. This led to customers who split the cost of Amazon Prime. However, as part of the updated model, the online retail giant is betting new subscribers will prompt others to get accounts for themselves.

What about older customers? Those who shared Prime with others prior to the changes can continue doing so until Amazon takes action or their membership is up for renewal.

It is evident that Amazon is portraying Prime as a feature for a household with two or more occupants.

It is estimated that Amazon has more than 44 million Prime subscribers, and nearly half of U.S. Amazon shoppers were Prime members. This is a hefty number after just two years. With this level of success – it also released a Prime cash-back credit card – Amazon is looking to grab those piggybacking off of Prime members.

Don’t be too worried. Amazon may kill Prime free shipping anyway. Amazon made a surprise profit in the three months through June, and CEO Jeff Bezos said that Prime was the source of the boost. Cutting down on account sharing may do more to boost the total profit the firm manages from the service.

The sharing problem grows

Account sharing has been a major problem for many websites. In many cases, it’s costing companies millions of dollars each year.

Last month, it was reported that Netflix, Inc.  could lose around $500 million this year because subscribers are sharing their accounts with other non-subscribers. In fact, one study discovered that two-thirds of users are providing account passwords and details with non-paying consumers.

Despite the level of revenues potentially being lost, most of the primary industry players are not cracking down on this practice.

Netflix CEO Reed Hastings told investors that account sharing was not a problem, though he did hint that the website would come up with a remedy. HBO CEO Richard Plepler conceded he didn’t care about password-sharing because it has very little effect on the company’s revenues.

It’s believed this is a marketing gimmick employed by companies everywhere.

However, one company with a streaming service is beginning to clampdown. World Wrestling Entertainment, Inc.  confirmed earlier this year it would prohibit account-sharing.

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