【Historical Archives】

In the past two weeks,Historical Archives Amazon has added benefit after benefit to Prime.

First, the company announced that Prime subscribers, who pay $99 a year for free two-day shipping on a vast selection of Amazon products, would get access to 1,000 free e-books and magazines. Then the Wall Street Journal reported Amazon would develop real-life convenience stores meant to serve its Amazon Fresh customers, who all subscribe to the grocery delivery service for an extra $14.99 a month through Prime.

Finally, on Wednesday Amazon launched Amazon Music Unlimited. The streaming service meant to rival Spotify and Apple Music comes with a $2 a month discount for Prime members, undercutting Spotify's $9.99 price with a $7.99 option.

---

You May Also Like

---

---

SEE ALSO: Google Home arrives in November and costs less than Amazon's Echo

So why is Amazon ramping up its offerings for Prime subscribers?

The answer is pretty simple: Prime members buy more on Amazon. More specifically, they spend two-and-a-half times as much on Amazon as customers who don't have Prime, according to equity research from the financial services firm Nomura.

"People who are Prime members shop more on Amazon and spend more money. That allows Amazon to offer more services and more benefits. It's a flywheel effect," Colin Sebastian, an Amazon analyst with the financial services firm Baird, told Mashable.

Amazon doesn't disclose much about Prime, but analyst research has found it to be a very lucrative program for the company.

Fifty-one percent of Prime customers spend more than $800 a year on Amazon, compared to only 16 percent of non-Prime Amazon customers, according to research from RBC Capital Markets. Seventy-five percent of Prime customers shop on Amazon at least two to three times a month, compared to only 20 percent of Amazon users without Prime.

Mashable Trend Report Decode what’s viral, what’s next, and what it all means. Sign up for Mashable’s weekly Trend Report newsletter. By clicking Sign Me Up, you confirm you are 16+ and agree to our Terms of Use and Privacy Policy. Thanks for signing up!

Adding more and more benefits is a play both to keep existing Prime subscribers loyal and to convert other Amazon customers into Prime subscribers. Once those Amazon customers get Prime, Amazon hopes they'll follow the trend and start spending more on the site.

SEE ALSO: Amazon's Alexa is the everyday hero of household life in new ad campaign

Prime subscribers already get access to Amazon Instant Video, which includes Amazon's original programming like Transparent and Mozart in the Jungle, as well as photo storage and some music and book benefits that predated the company's recent additions. Prime membership also comes with benefits related to Amazon's core business of shipping and delivery, including free same-day delivery and restaurant delivery for select products and zip codes.

But the "flywheel effect" is what keeps more of these Prime additions coming. As more benefits hook more subscribers on Prime and continue to grow Amazon's business — to 60 million Prime subscribers in the US and 100 million internationally, as estimated by RBC Capital — Amazon gains the ability to experiment with even more services.

"When companies reach a certain scale they have more opportunities to investigate new areas of growth. That seems to be what Amazon is doing now," RBC Capital Amazon analyst Mark Mahaney told Mashable. "They've reached enough scale that it's easier for them financially to experiment with a standalone music streaming service, mini-retail destinations for groceries or a small number of bookstores."

SEE ALSO: Amazon's new shopping 'wand' isn't as magical as it sounds

Instant Video was the first bonus feature that dramatically increased how loyal Prime customers were to the program, analysts said. Ten percent of Prime subscribers first signed up to gain access to Instant Video, Mahaney said. And data shows Amazon Video is accounting for more internet traffic nationwide. Amazon Video made up 4.3 percent of peak downstream traffic in 2016, compared to 2 percent a year earlier, according to a study by the network-equipment provider Sandvine.

Amazon says that the appeal of Prime is key to its strategy.

"Over the last 10 years, Prime has evolved into an all-encompassing membership program at an incredible value," an Amazon spokeswoman told Mashable. "As we continue to invest and innovate across Amazon, we will continue to increase unlimited fast, free shipping options, expand selection and add more content, as well as introduce new benefits, such as the recently announced Audible Channels for Prime, Prime Reading, Twitch Prime, and access to Amazon Music Unlimited at a breakthrough Prime member price, to bring even more convenience, selection and entertainment for our members to enjoy."

And so far, the strategy is working.

Nomura expects Amazon Prime to reach 42 percent of 18-to-64-year-olds in the US by 2020, compared to 33.6 percent today.

And that continued growth means Amazon will be able to add more services to Prime, and the cycle will continue. So far, most of Amazon's perks outside of shipping and delivery have been types of media: Movies, books, music. But Amazon could link its continued push into retail more closely to Prime or start experimenting with other kinds of perks.

"It's hard to predict sometimes where Amazon will go," Sebastian said. "I think Prime will continue to evolve quickly, and in two years will offer a whole lot more services than what they offer today."

Topics Amazon Prime Video