Amazon Prime, which offers free two-day shipping on all purchases, unlimited streaming of movies and TV shows, and access to a free Kindle book each month, has attracted more than 10 million members since its launch in 2005.
While an exact figure on the number of members has yet to be revealed by Amazon, the Morningstar report used a survey of Amazon shoppers conducted by Consumer Intelligence Research Partners market-research firm this past November.
The report credits the Kindle Fire as a major factor to the amount of subscribers, as Amazon offers a free 30-day trial with each purchase of the tablet. In 30 to 40 percent of these cases, individuals end up paying the $79 annual fee after the free trial ends.
"We believe the appeal of Amazon Prime is undeniable, as it adds expedited shipping to Amazon's already powerful combination of low prices, a wide selection of products, and unrivaled customer service," Morningstar analyst R.J. Hottovy wrote in the report.
"Just as important, we believe Prime strengthens Amazon's network effect, as the explosive growth in Prime memberships the past few years entices merchants (including third-party sellers on the platform and wholesalers/manufacturers selling directly to Amazon) to offer a greater number of Prime-eligible merchandise."
In addition to the amount of Amazon Prime members, the report revealed that members spend twice as much on Amazon.com (News - Alert) compared to average non-prime customers. The report also estimated that the Prime service contributes to approximately a third of the company's operating income. Moreover, the number of Amazon Prime members is expected to increase to 25 million by the year 2017.
“We expect Prime to become an increasingly vital contributor over the next five years," Hottovy wrote in the report. "Management's continued trial membership bundling with Kindle Fire purchases and rapidly expanding digital content library should be key catalysts for Prime membership growth in the years to come.”
Edited by Brooke Neuman