Amazon is reportedly in talks to develop an ad-supported version of Amazon Prime Video. That's Amazon's premium streaming service that features a large library of on-demand content and access to select live sporting events, including an NFL Thursday night package, which already features ad breaks.

Discussions about an ad-supported Prime Video tier have been conducted in recent weeks and are still in the "early stages," according to The Wall Street Journal (WSJ).

Amazon's discussions about adding ads to Amazon Prime go back further than that, said industry analyst Dan Rayburn. "These discussions have actually been going on internally for months, not weeks, but it's unknown when Amazon might roll out an AVOD offering," he noted on LinkedIn.

Amazon Prime Video is currently a perk in Amazon Prime, a service that regularly sells for $14.99 per month or $139 per year. Amazon also sells Prime Video subscriptions as a standalone for $8.99 per month. An ad-supported version of Amazon Prime would presumably cost less than the current ad-free versions and help the service appeal to consumers who are willing to save a few bucks in exchange for ads.

Joining the crowd

Amazon is no stranger to selling and inserting ads into streaming services. In addition to inserting ads into NFL games, it also pumps out ads in Freevee, its recently rebranded, free streaming service. Amazon is already third in US digital ad revenue, behind Google and Meta/Facebook, WSJ said, citing data from Insider Intelligence.

If Amazon does push ahead with an ad-supported version of Prime Video, it would join just about all others operating in a category of services in the premium, general entertainment subscription video services market. Other services that feature less expensive, ad-supported options include Disney+, Max, Netflix, Paramount+, Hulu and NBCU's Peacock.

Some analysts aren't bullish about Amazon expanding Prime Video into an already competitive market of ad-supported streaming services.

"[T]here is only so much viewership to go around," the analysts at KeyBanc Capital markets explained in a brief note following the WSJ story. "We see a core issue in AVOD [advertising VoD] is that many consumers still prefer ad-free, which makes it difficult to scale from an inventory perspective and can limit advertising opportunity."

WSJ said Amazon is also in talks to sell the ad-based tiers of streaming services from Warner Bros. Discovery (such as Max and Discovery+) and Paramount Global (Paramount+) via the Prime Video Channels platform that already offers a wide range of subscription-based streaming services. Amazon is reportedly in talks to gain streaming rights to NBA games, so an ad-based form of Prime Video could help to pay for those rights, the pub added.

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— Jeff Baumgartner, Senior Editor, Light Reading