Amazon tweaks Prime terms, better defines household sharing

Amazon tweaks the definition of households in its Prime terms and at first glance the moves are likely to limit password sharing abuses. Will it juice growth?

Amazon has changed the terms of its Prime membership to limit sharing to two adults and four kids. The big question is whether the move gets Amazon to its Prime growth targets faster.

In a move that generated a bit of hubbub, Amazon launched a feature called Amazon Households. This feature allows you to share content with a family library and links Prime and Amazon Mom benefits. The feature also is likely to put a lid on Prime membership sharing.

Under Amazon Households, sharing can be set up between two adults, each with an individual Amazon account, and up to four kids. Previously, Amazon allowed four household members to share a Prime account. In a nutshell, Amazon wants it so there's one Prime account attributed to an address.

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It's unclear how many people are mass sharing Prime benefits, but once someone is removed they can't be added back. The changes surfaced on SlickDeals and then spread from there.

From Amazon's perspective, the move to better link households makes sense. The company is investing heavily in Prime with the aim of creating a virtuous spending cycle among members. Prime membership was the key reason Amazon had its Prime Day sale. Prime membership, along with Amazon Web Services, was one reason why Amazon reported better-than-expected second quarter earnings.

Macquarie analyst Ben Schachter estimates that Prime has already reached anywhere from 20 percent to 25 percent of U.S. households. His bet is that Prime will reach half of U.S. homes by 2020. Amazon Prime is also gaining internationally too.

Schachter said:

Given the success of Prime Day (whose primary purpose, we believe, was to drive Prime membership, not profitable sales) and coming enhancements to the Prime program (potential MVNO, more media content, possible subsidies from third-parties, etc...) we now believe that our target of 50% of US homes by 2020 could be conservative.

In a nutshell, Amazon is pulling another lever to juice Prime growth. If you zoom out a bit, defining households is going to be a big deal for any consumer subscription service.

Netflix CEO Reed Hastings was recently reported to be pondering upsell opportunities and better defining households. However, Hastings' actual comments are inconclusive. Rest assured that Netflix is looking to better define account sharing.

Hastings said:

Our entry-level plan in the US is actually $7.99 for our standard-def one-stream plan, so it is incredibly affordable. And that's part of what's propelling our growth. We also want to motivate people to be able to move up to the two-stream and the high-def and also the ultra high-def plan as you referred to.

Over the last year, we've raised ASP about 5%. We'd like to keep that moving. So we're going to continue to have incentives for people to move up in the plans as suits their usage pattern, but we want to take it very slow. Things are going well, there's no reason to be disruptive. We're not planning anything in the U.S. this quarter. It's really focused on going very steady, very slow. And over the next decade, I think we will be able to have more and more content and add more value, and then to be able to price that appropriately.