Is Amazon Prime worth it?

amazon box

Amazon released a new monthly pricing scheme the other day for its popular Prime service which lets you enjoy free two-day shipping among many other services. At $7.99 a month, that’s nearly $17 more expensive each year than if you subscribed annually.

Is Amazon Prime worth it? Let’s take Prime’s primary offerings and attach a dollar value to it. This will vary per person of course, but I’ll try to be as objective as possible.

Free two-day shipping

First, there is free two-day shipping. Putting a finite number to it is difficult since it depends on how regularly you purchase stuff on Amazon. According to Amazon’s shipping rates, popular items such as books, apparel, and electronics typically have a shipping cost of around $4-8 for standard shipping of 3 to 5 business days. Furthermore, many items on Amazon are eligible for free shipping if the order is over $25. Many people often bundle multiple items in order to redeem the savings.

With those factors in mind, let’s look at the frequency of purchases from Amazon using myself as a sample. During the past year, I’ve made 14 purchases from Amazon. That is about 1.4 purchases a month over a 10-month period. Since the holiday season is approaching, I expect my spending to increase. Let’s say it doubles. So, over the course of the last year, I predict that I will make approximately 20 purchases from Amazon.

Let’s assume that about half of those orders were eligible for free shipping without Prime (since the order was above $25). That leaves us with 10 orders. For the average cost of shipping, let’s say that it is $6 per order. Since Prime shipping is in 2 days versus 3-5 days, let’s attach a $1 value for all orders.

In total, Prime shipping can be valued at ($6 x 10 orders) + ($1 x 20 orders) = $80.

From that alone, we already break even before factoring in other Prime services. Here’s the score so far, with the different subscription options computed by subtracting their costs from the total value of Prime.

Total value: $80

Annual: +$1

Monthly: -$16 (rounded off)

Student: +$41

Prime Instant Video

The selection of movies on Amazon Prime is abysmal. Most of the videos I actually do want to watch cost money in addition to an existing Prime subscription. All complaining aside, let’s continue.

Having subscribed to Prime for approximately 2 months now, I’ve watched a grand total of two movies (Jiro Dreams of Sushi and Transformers 3, in case you’re curious). After an hour-long session of searching for interesting movies, my watch list contains a massive collection of seven movies.

Let’s assume that I end up watching all of these movies within a year. How much should each movie be worth? Since I could rent a movie from RedBox for about a buck, let’s also say that each movie is also worth a dollar.

Doing the math, that amounts to about 9 movies x $1 = $9.

Total value: $89

Annual: +$10

Monthly: -$7 (rounded off)

Student: +$50

Kindle Owner’s Lending Library

Prime subscribers also get the benefit of borrowing a free book from the Kindle Owner’s Lending Library. Checking the total number of available books, I find that there are approximately 236,761 books. Since you are limited to a book a month at most, that’s a total of twelve free Kindle books a year.

With that information in mind, let’s determine a value for this service. Nowadays, most Kindle books retail for around $9.99. In my opinion though, most of the books available are as bad as the selection of video content. For that reason, I will value a book at half that amount, or $4.99. Let’s assume that we borrow the maximum of twelve books.

In total, that amounts to 12 books x $4.99 = $60 (rounded up).

Total value: $149

Annual: +$70

Monthly: $53 (rounded off)

Student: +$110

chart_1

Other things to consider

Amazon Prime subscribers can also share the benefits of free two-day shipping with up to 4 additional family members or up to 4 coworkers. This option however excludes Student subscribers. While this doesn’t benefit you directly, it does allow households or friends to benefit from free shipping.

Also, some Prime subscribers may not own a Kindle device which would completely devalue the benefit of free Kindle books.

Verdict: Amazon Prime is a steal

amazon prime

Even if you purchase things from Amazon at most once a month, there is likely savings to be had. A monthly subscription will cost the most but if you’re not fond of paying for a full year upfront, it’s not a bad tradeoff. Student memberships are an incredible deal if you’re eligible. In fact, you can start off with a 6-month free trial if you’re a student.

So, in conclusion, I have only one question:

How are you making any money, Amazon???