Amazon Prime Video’s ad supported tier poised to pull in $1B in inaugural year

Amazon Prime Video is set to make a significant foray into the ad-supported streaming landscape, with its upcoming service launch on January 29 anticipated to bring in an estimated $1 billion in its first operational year, as reported by MoffettNathanson Research. Projections indicate that this figure will escalate to $1.75 billion in 2025, $2.26 billion in 2026, and $2.76 billion in 2027. 

The research bases its estimates on a projected $32.50 CPM (cost per thousand viewers), which is lower than Netflix’s $40 CPM. Michael Morton, a media analyst at MoffettNathanson, acknowledges that sell-out rates may be relatively low initially but expects them to rise to 85% by 2025 and 90% by 2027.

Simultaneously, the research forecasts that around 15% of U.S. Amazon Prime subscribers will choose to pay an additional $2.99 per month to continue enjoying the platform ad-free, contributing an additional $400 million. Globally, Amazon is projected to generate $300 million in ad revenue and $100 million in incremental subscriber revenue during its inaugural year.

Beyond the ad-supported service, Amazon’s FreeVee, a Free Advertising Supported Television (FAST) channel akin to Tubi and Pluto TV, is predicted to bring in $1.7 billion in 2025. The inclusion of “Thursday Night Football” is expected to contribute another $600 million to Amazon’s streaming and digital video platforms. Combining all these ventures, Amazon’s annual revenue from streaming and digital video platforms is forecasted to reach $4 billion, surpassing competitors like Hulu at $3 billion, Peacock at $2.3 billion, and Roku at $1.9 billion.

Morton concludes by stating, “We forecast Amazon and Disney being neck and neck for the largest drivers of [total] AVOD ad revenue,” indicating a fiercely competitive landscape. The broader outlook suggests that Amazon Prime Video currently boasts 70 million subscribers, with users viewing an average of 0.3 hours of content daily. As the streaming wars continue to intensify, Amazon’s strategic moves in the ad-supported space position it as a major player in the rapidly evolving digital entertainment landscape.