Sketchy Bloomberg Report On Amazon Prime Contains Little Real Data

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Amazon (NSDQ: AMZN) Prime has three to five million members, according to “people familiar with the matter” cited Bloomberg. The main thrust of the piece is that that is about half as many as analysts believed, but since Amazon has never released numbers about the program, it’s not clear what the takeaway is. It’s not as if Amazon publicly stated that it has attracted half as many Prime subscribers as it wanted to; in fact it’s made clear that it’s moving ahead forcefully with the program.

Bloomberg cites the following from “three people familiar with the matter”:

As of October, 3 million to 5 million people subscribed to Prime, a program begun in 2005 that provides two-day shipping for $79 a year, said the people, who asked not to be named because the figures are private. Amazon is working to reach 7 million to 10 million in the next 12 to 18 months, the people said. Analysts have pegged the current number at 10 million or more, with expectations for it to climb higher this year.

We obviously don’t know what these people’s connection with Amazon is, but the numbers they’re citing — three to five million Prime subscribers — is a pretty wide range, which suggests the sources are at some remove from the company.

The “slower adoption of Prime adds to concerns about Amazon’s revenue growth,” says Bloomberg. Again, this “slower adoption” is in reference to analyst estimates, not any actual data from Amazon. October data also does not include the people who received free one-month Amazon Prime trial memberships with their purchase of a Kindle Fire, and may have converted since then.

Who are the analysts, though, who estimated Prime had 10 million or more subscribers? They aren’t cited in the Bloomberg piece. Piper Jaffray’s Gene Munster estimated, in a Wall Street Journal (NSDQ: NWS) piece last year, that Amazon Prime would have 10 million subscribers by the end of 2011 and that Amazon lost $11 on each Prime member.

Macquarie’s Ben Schachter may be the analyst who’s done the most work on Prime; late last year he released “The Amazon Prime Impact: A Self-Portrait Case Study” (PDF), in which he analyzed the impact of his household’s Prime membership on their shopping habits. He estimated his own household made about seven times more orders from Amazon annually after signing up for Prime.

“Investors have little official data on Prime from AMZN,” he, an analyst, noted. “The company does not disclose any metrics about how Prime impacts its business, and investors are still unaware how many Prime subscribers there really are.” And he did not venture to guess.

What has Amazon said about the matter? Something, sort of. In the company’s most recent earnings call, CFO Tom Szkutak said it’s too early to say definitively how those Kindle Fire Prime trial memberships have converted to paid but “we like what we’re seeing.” He also said the company is “committed to adding more content to Prime and making Prime better…We think it is very good for customers and very good for shareowners….From what we see so far, it supports continued strong investment, so that’s what we’re doing.”

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